Gersh escapes MFS wreck

Melbourne businessman Joseph Gersh has extricated his real estate investment banking business from the wreckage of MFS just six months after securing what must have appeared as a deal too good to be true.

Perhaps it was just that. Gersh sold 30 per cent of Gersh Investment Partners to MFS to $12 million in cash last August, and then accepted a further $70.5 million in MFS stock for the remainder of the business in November. That valued GIP at near enough to $100 million, but subsequent events have shown that to be largely illusory, or at least a fleeting valuation.

At the time of the transaction, MFS shares were valued $5.75 each, but they have since slumped to just 99c. Gersh had the right under the deal to take more MFS shares to make up for the slump in the market price, but decided the safest bet was to pay $20 million in cash to MFS to buy the GIP business back outright.

The result of the six month exercise is that Gersh is out of pocket by some $8 million in cash, but still has just over 12 million shares in MFS. According to the latest closing price, those are valued at around $12 million, leaving him with an overall profit from the venture, but the future direction when the shares resume trading is anyone's guess.

Gersh appears happy to have the business, and the 14-strong investment team, back in private ownership, and intends to focus on its core business of property development and property finance. And despite the volatility, he sees opportunities in the market. "You do need to be strategic in what you invest in,” he says. "We've been around for a number of years, I'm sure we can handle this (downturn).”