JOHANNESBURG – Last week, before returning to SA for the summer, serial deal maker Natie Kirsh made a bid for the Minerva Property Group in London.
Kirsh who now has extensive interests worldwide gave me the first media interview he has given in 20 years. He did it for old time’s sake as I used to write about his exploits in the FM, the Rand Daily Mail, Finance Week and Business Times.
Having acquired 29.9% of Minerva, and wishing to increase his stake beyond 30%, Kirsh was obliged by LSE rules to not only make a bid for the rest of the company but to also provide information on himself and his group. He offered 50p a share, a 33% premium to the pre-deal price, hoping for maximum acceptance. Management viewed his price as inadequate and advised against the offer.
The share price has subsequently moved up to 58p, prompting speculation of a counter-bid. Perhaps Blackstone might bid, mused the Financial Times.
Traced to his Sandton home, Kirsh told me that because the LSE required him to publish information on himself, he was less reluctant to be interviewed.
He said: “After a bid is announced, a freeze period starts. The London Takeover Panel forbids purchases or sales by the bidder for a period of 21 days, so I have taken time off to visit old friends and enjoy the South African sunshine.
He told me that he regards Minerva as an attractive long-term investment in quality real estate assets that have been mispriced due to the world financial crisis.
“The 50p offer presents an opportunity for short-term investors to exit and is not an opportunistic strategy to make a short-term profit. “
He told me that even if a counter-bidder matches or trumps his price, he is not a seller.
His view is that the global financial crisis made it possible to acquire assets at huge discounts – one of which was shares in Minerva. Minerva has two iconic projects nearing completion right in the City of London, one a stone’s throw from the Bank of England and the other near the Lloyds building as well. There are also three other great development sites.
“Even though prices have recovered many property companies and Reits still provide attractive investment opportunities, perhaps many other than Minerva.”
But he prefers to build a significant stake in Minerva, rather than to acquire minor stakes in a spread of entities where he will have no influence.
Kirsh’s deputy chairman is Ron Sandler, an ex-Zimbabwean, who is one of the most prominent business people in the UK. Some years back Sandler was charged to sort out the problems at Lloyds of London. He then briefly went on to attempt to rescue NatWest from the bid by the Bank of Scotland. The UK government then asked him to do a couple of jobs, the last of which was to help with the rescue of Northern Rock. As executive chairman he did the initial hard work and then recruited a new CEO. He now remains as chairman; Sandler is also chairman of Pearl, which has ₤70bn of assets under management.
Kirsh had a colourful history before he left SA. In the early 1980s Kirsh partnered with Sanlam. Through the Tradegro pyramid structure, he controlled 12% of SA’s retail and wholesale sales through Checkers, Metro Cash, Dions, Russells and the JD Group (JSE:JDG). The chains employed 40 000 people.
In about 1984, and without the parent company’s knowledge, Checkers launched an over-ambitious programme to develop shopping centres each anchored by a Checkers supermarket. By 1985 this developed into a huge commitment to find financing, the availability of which was largely dependent on letting the line shops in these centres.
Following President Botha’s Rubicon speech, the SA economy crashed and Checkers struggled to find the needed tenants. This brought huge pressure on the Kirsh Trading Group to come up with the money.
In the financial chaos that followed the withdrawal of international credit lines to South Africa, the chairman and CEO of Sanlam, Fred Du Plessis and Marinus Daling saw an opportunity. In the fine print of the shareholders agreement they found ways to frustrate Kirsh’s efforts to carry out the financial restructuring needed. Facing a fight with Sanlam and thinking that SA was going down the tubes anyway, Kirsh decided to “start anew”, sold his stake to Sanlam and left the country in 1986.
He left only after buying Metro’s share in a start-up joint venture he called Jetro that he had launched in New York. Sanlam thus acquired control of Kirsh’s South African Trading Group, which it soon found it could not manage and which they sold off in parts.
Natie moved to New York building Jetro also trading as Restaurant-Depot into a very sophisticated business and a huge success.
Jetro is now managed by former Dions MD Stanley Fleishman.
Jetro is now the largest Cash & Carry chain in the USA. Each week hundreds of thousands of traders, restaurateurs are drawn by the keen prices and quality of shopping at a large sophisticated cash & carry, which prefer to paying the high prices that delivery and credit demands. Today Jetro is a giant. Kirsh won’t comment on sales or profit but it has 81 branches covering most large US cities. Kirsh owns virtually all of it.
He explains: “My control structure in SA was built on a pyramid. I had a 6% economic interest and 100% of the headaches. I decided: never again.”
After running public companies and appearing on the business pages in SA virtually every week, he enjoyed the anonymity and privacy of running a private business.
In the early nineties Barry Stiefel introduced Kirsh to the Vat reclaim business, from which Meridian Vat Reclaim was born. Meridian became the largest Vat Reclaim agent in the business-to-business space and was sold in 1999 for $200m to PRG. Stiefel manages the Kirsh family office, is responsible for the treasury functions and numerous businesses in which Kirsh has taken a strategic stake and backed entrepreneurial management teams.
Just before the banking crisis hit, Jetro raised $800m in a bond issue on very favourable terms. This enabled Kirsh to expand rapidly and further diversify when assets became cheap.
With some of this money, Kirsh bought 15% of Abacus, an Australian Real Estate Investment Trust (REIT), and then underwrote an A$190m rights issue, which increased his stake to 27%. His cost per share was A$25c and is now A$45c. At the same time the Aussie dollar firmed from US70c to US93c. Not a bad one year return.
Amongst his other interests in Australia is the Jandakot Airport, located in the suburbs of Perth. It is the busiest airport in Australia but has no passengers or freight. Its traffic comes from 12 Flying Schools. The first phase of a multi-billion Australian dollar real estate development has started on the surrounding vacant land. This will include commercial office buildings, a warehouse precinct, and a “Big Box” shopping centre, which is the first phase of a large retail precinct.
He and his partners are also involved in the redevelopment of the Waca cricket ground. “The cricket ground has acres of property, which is ripe for development. Western Australia really is taking off.”
His partners in Perth are two ex-South African entrepreneurs Greg King and David van der Walt. Greg is the son of Mervyn King, of King Report fame, who was for some years Natie’s deputy in the early 80s.
What does he have left in SA?
“A good management team led by another old friend Myra Salkinder, and various interests in real estate.”
Kirsh’s home stands on a prime piece of property several hectares in extent on Rivonia Road close to Sandton City. There is also an ongoing business relationship with the Automobile Association primarily in insurance.”
The Sandton property is a plum. Kirsh would like to offer selected architects the opportunity to come up with a concept which will do the site justice, and then proceed with the best. But it might have to wait. He has much else on his plate.
He also owns a share of a luxury golf estate and game sanctuary, called Millvale between Koster and Rustenburg. Investec holds the other major share in this Gary Player-designed golf course with a plush 12-bedroomed residential golf club – and no members. It might yet be developed into something for the rich and famous.
A deal in mainland Europe that makes the £84m bid for Minerva look small is a possibility but at this stage it is only a gleam in his eye.
Swaziland, where Kirsh started his career 50 years ago, is still a small but important part of his life. He continues to hold Swaziland citizenship and the most of the entities he started are still thriving businesses. Kirsh’s interests there are now run by Paul Friedlander.
The thing he is most proud of is a start up seed fund, called Inhlanyelo Fund (Swazi for seed) that has financed the establishment of 10 000 small grass root businesses in Swaziland, 7 000 of which have succeeded.
About 12 years ago, at the request of a young member of parliament, he extended 28 loans of about R3 000-R5 000 each to small business people. The project was a great success. With the prime minister’s co-operation, he extended the scheme to cover each constituency. Each member of Parliament then had the job to find suitable candidates for loans to start their own small business in his area.
“Their success has been amazing.”
When the Inhlanyelo Fund expanded, Standard Bank came in as a 30% partner and seconded a bank manager to the project. Ten years on, Standard Bank is now rolling out ten similar schemes in SA.
“I’d like to extend this unbelievable grass roots poverty alleviation model to all of Africa. I’m hoping for help from Standard Bank.”
His dream is to make a difference to the continent. He has already asked Warren Buffett to help fund such a project. Buffett said neither said yes nor no, but has since given his fortune to the Gates Foundation and suggested Kirsh approach the Foundation.
“I worry that they may say yes, and right now I don’t have the time that it will take to make it a reality.”
A year ago he expanded his concept to Israel – creating the “Natan Fund” which has already financed 150 new grass roots start ups.
Kirsh has passed the 77-year milestone but holds his years well. There’s a bit of a paunch that he did not have in his squash-playing days 25 years ago and a couple of lines crease his face. There’s vitality in his eyes. He says he keeps on playing the game of business because it is creative and he enjoys it.
Kirsh has a son, who has a chain of bakeries in New York and two daughters. All three are deeply involved in philanthropy being leaders in charitable and not for profit causes in New York, London and elsewhere. He does not believe in saddling his children with his businesses.
“They should do things for themselves” – and that’s what they are doing.”
Write to David Carte: email@example.com