When the Oracle of Omaha, Warren Buffett, is interested in acquiring a stake in a company, not many business leaders would dare to disagree on terms or walk away from the deal.
However, that is what South African and Swazi billionaire Nathan Kirsh did after Buffett was set to take a 27% stake in his US-based trading business, Jetro Cash & Carry.
In the years following the scrapped deal, Kirsh turned Jetro into one of the largest privately-owned companies in the United States, worth over $3.5 billion at the time.
This success happened in the United States, but it was built in South Africa, with Kirsh transplanting the model he used to make Metro Cash & Carry a retail force in his home country.
Kirsh was born on 6 January 1932 in Potchefstroom in the modern North-West Province, to two Jewish parents who immigrated to South Africa from Lithuania.
In a discussion with the Museum of the Jewish People, Kirsh said he had a comfortable life with very few incidents of antisemitism. He estimated that there were around 100 Jewish families living in Potchefstroom when he grew up there.
Kirsh did not join the Israeli army after the state was formed in 1948, as he was too young. As a result, he finished his schooling at Potchefstroom Boys High in 1949.
After earning a Bachelor of Commerce from the University of the Witwatersrand, Kirsh helped his mother with the operation of the malt factory his father started in Potchefstroom for a few years.
Like his father, Kirsh had a strong entrepreneurial spirit, which pushed him to travel to Swaziland, modern-day Eswatini, to replicate the family’s malt business there.
Kirsh launched a corn milling and malt business in Eswatini after the colonial government rejected his plan to build a brewery.
This business started with the insurance payout for his father’s death, and rapidly built an effective monopoly on the maize business in Eswatini.
Kirsh used the proceeds from the business in Eswatini to buy his father’s original malt business in Potchefstroom and formed Kirsh Industries in 1959.
His brother, Issy, managed the malt business before founding Primedia, which now owns EWN, 947, and 702, among other media assets.
The malt business was later sold to Tiger Brands, giving Kirsh significant capital, and he knew exactly what to do with it in the highly distorted Apartheid economy.
Cash & Carry goes from hero to zero
Kirsh bought Moshal Gevisser in 1970, which was a South African food distributor piloting a cash-and-carry store in Newcastle, KwaZulu-Natal.
Kirsh spotted a gap in the market with the cash-and-carry model, as under Apartheid laws of the time, white business-owners were not allowed to operate in black townships.
The young Kirsh would use Moshal Gevisser to supply goods to black shopkeepers to stock their stores in townships and tap into the burgeoning informal economy.
Moshal Gevisser would merge with Metro Cash & Carry and grow rapidly to become a dominant food retailer in South Africa.
The company was a mixture of food retail dynasties, with Kirsh owning 30% of the company and another 30% owned by Tiger Oats founder Rudi Frankel. Founder of Metro, Lionel Katz, had another 20%, and the rest was publicly listed.
Kirsh and Tiger Oats shared control, but Kirsh did not like this arrangement. He bought a further 10% on the market and got around Frankel’s pre-emptive right by buying the holding companies that owned the Katz Group’s shares.
The deal left a sour taste in Frankel’s mouth, and Tiger Oats launched a court bid to stop Kirsh from taking over the Katz interests. However, the court found in Kirsh’s favour.
Showcasing a knack for financial dealmaking, Kirsh created a pyramid structure to finance the deal and give him control of Metro. This structure created a new entity, Kimet, and was listed on the JSE in 1978.
Kirsh, through Kimet, became known as a takeover king, snapping up Checkers, Dion, Union Wine, and Russells to give the company control over 12% of all consumer goods in South Africa.
However, things would soon turn south, with rising political tension and economic turmoil in South Africa inhibiting the growth of businesses. At the same time, Kirsh was developing global contacts and took a particular interest in New York’s food distribution sector.
Kirsh was uniquely exposed to the widespread protest action in South African townships in the 1970s without his knowledge. The executive running Checkers under Kimet used Kirsh’s guarantees to build shopping centres he did not know about.
To continue growing amid increased economic turmoil, Kirsh needed capital, and he turned to Sanlam’s Fred du Plessis. They would form a holding company, Sanki, in 1984, in which Kirsh had 51% and Sanlam 49%.
This would be Kirsh’s big mistake in South Africa, with the entrepreneur signing the deal on his lawyer’s advice despite concerns about a clause that could give Sanlam control over capital increases.
A leading Afrikaans businessman warned Kirsh about the deal at a family dinner, the Financial Mail reported at the time.
“Natie, you chose the wrong partner. You know that Sanlam logo, the two hands holding a globe of the world? Those hands are around your balls now, and when they get the chance, they’re going to squeeze them,” Kirsh explained.
Sanlam squeezed hard when Kirsh wanted to raise further capital. Kirsh could have fought them through the courts and risked the entire business, or sold it for cheap.
Kirsh opted for the latter, selling the business and what many would consider a life’s work. He noted at the time that his decision was also impacted by the feeling that South Africa’s future looked bleak.
However, Kirsh, ever resourceful, had not sat idly by while his South African empire was prised from his grasp, with the businessman simultaneously building an American retail giant.
The American Dream and Warren Buffett
After the Sanlam squeeze, Kirsh moved to New York to focus on the business he had launched there in 1976 – Jetro Cash & Carry.
Kirsh effectively mimicked the model of Metro in the world’s largest retail market. However, the collapse of his South African empire had a lasting effect on the retailer.
After moving to New York, Kirsh kept out of the public eye and only maintained his business contacts, steadily finding partners for new ventures around the world.
He would keep control of his growing interests in private partnerships, rather than the publicly listed companies he had in South Africa.
“I lost my fortune and the stature that came with controlling the country’s largest trading operation, employing more than 40,000 people,” Kirsh said. It was hard to recover.
However, the entrepreneur would not merely bounce back – he would rise to new heights, with Jetro being by far his most successful business.
Through steady acquisitions, Jetro grew into a retail giant in the United States, using the cash-and-carry model to supply restaurants, corner stores, and New York’s surging food scene.
Despite Kirsh’s efforts to stay out of the public eye, he could not hide the substantial growth of Jetro for long.
The business caught the eye of the person largely considered to be the best investor to have ever lived, Warren Buffett, and initial conversations around Berkshire Hathaway taking a stake in Jetro were positive.
A deal between the two was even ironed out, with Berkshire set to take a 27% stake in the privately held company. However, the two men could not agree on terms beyond that, and Buffett walked away.
Kirsh still holds around 70% of Jetro, which has over 115 Jetro Cash & Carry and Restaurant Depot stores in the United States.
According to Forbes, Kirsh’s net worth sits at $7.3 billion, and the billionaire lives in Eswatini, from where he manages a sprawling network of investments.
When he was younger, Kirsh would spend six months of summer in South Africa, with the rest of the year spent in London, New York, the south of France, and Israel.
Forever the entrepreneur and businessman, Kirsh would keep his eye out for bargains to add to his global empire.
Kirsh also runs a significant philanthropic operation, with his Inhlanyelo fund having financed over 5,000 small businesses. – Business Insider