Greg Bortz now looms large at Grand Parade Investments (GPI), but he has been in the game from a very young age. When he was nine he was sneaking through a gap in the fence to get to the horseraces at Greyville in Durban. He could hear the commentator from his house on the Berea.
Bortz found a gap to leave South Africa with an accounting degree and get a job in London when it was a battle just to leave home. This was in the unsettled period of pre-liberation South Africa. He then found a gap to move to the US when his work permit caused him trouble in the UK. He found yet another gap to get a green card when he had no right to be in the US.
Getting back to the horses, Bortz might well believe that the only reason to get up in the morning is to go to the races. No surprise, then, that he is a proud holder of an equity stake in Cape Racing. Right now, that’s for joy and not for profit. He has big ideas to turn Kenilworth Racecourse into a destination for food and entertainment.
Bortz came to UCT in the late 1980s. He brought along the rights to sell the Winning Form racing guide, obtained from owner Owen Heffer. Winning Form has since grown into an online gambling site — yes, Hollywoodbets. Heffer is to be a partner in Cape Racing, which has large tracts of land and could be an option in GPI — but it must make money.
Bortz dropped horses when he landed in the US, too busy hustling for a gap to get into investment banking. He leopard-crawled through all the top-branded investment banks. There was success at Credit Suisse, a walkout to Lehmans and then top executive appointments. He is made for investment banking, as a dealmaker, or perhaps more simply, a gap finder.
After banking, he found a gap again, into private equity. A focus on distressed businesses and a target of medium-sized ones. He built the fund and sold it to a bigger player. The market crashed. It was the sub-prime crisis, and Bortz had a chance to buy the assets back cheaply. He then sold them at a better price.
Then he was back in South Africa. It was Covid time. No gap … rather a lifestyle. Scouring around GPI became a further gap in the fence.
For Bortz, it was simple. The food assets had failed, but the gambling assets were supreme. They were prime assets, GrandWest and Grandslots, both operated by gaming giant Sun International. These assets sat passively in GPI. The market was still underweight, the opportunity buried in poor decisions in the food division. Even though there was no more food in the GPI stable, the market didn’t care. But Bortz did.
In any event, GPI founder and prime mover Hassen Adams wanted out. Bortz knocked at the door. Now again, the horses came cantering back. Previously, Adams and Bortz had shared a horse. Adams persuaded the legendary banker GT Ferreira, to sell his stake as well. Bortz had suddenly amassed about 20% of GPI. He went into the market to pick up shares via an offer, and also approached big holders, In this way he pushed his equity to a mighty 54% of GPI.
He is made for investment banking, as a dealmaker, or perhaps more simply, a gap finder
Now where is the next gap? Bortz thinks like an investment banker, not an operator. GPI fits that profile because it holds passive investments.
Bortz has found a company with about R50m a year in free cash flow. He has put in about R750m in cash. Therefore, on a 333c a share average cost of equity, he would want at least a 33c dividend a share to cover the cost of capital. GPI is now on track for about 20c a share for the year to June 2023. Dividends must grow or Bortz is running backwards on a dividend play. He indicates the growth will come out of his gambling assets, to bolster distribution. Maybe also acquired.
Bortz holds about 240-million GPI shares. There is no buyer, no liquidity and a tiny market capitalisation of about R1.5bn.
Sorry, there is one buyer, Sun International. It holds about 30% of GPI. It operates Grandslots and GrandWest Casino. Strangely (and perhaps now inconveniently), GPI holds a big chunk of Sun International’s best assets. A legacy of an empowerment deal dating back to the mid-1990s.
Bortz could hold the crown jewels, and ultimately sell them back, to Sun International at a big price. At the same time, Sun International — which effectively has a blocking stake to vote down any special resolutions tabled by GPI — could hold and try to squeeze him out at a low price.
Bortz has found the fence. His play is to find a gap.
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