Joe Lewis: Boxing clever?
Fabled currency expert Joe Lewis, aka The Boxer, has snapped up an $860m stake in Bear Stearns. A shrewd move or a bet too far? By Stephen Foley
Tuesday 11 September 2007
Joe Lewis, the privacy-loving billionaire who, along with Daniel Levy, controls Tottenham Hotspur football club, has just taken one of his biggest gambles.
He has invested $860m for a 7 per cent stake in Bear Stearns, the investment bank that has been the worst casualty of this summer's credit market crisis, it was revealed yesterday.
Even for a fabled currency speculator who won hundreds of millions of pounds on sterling's ignominious exit from the Exchange Rate Mechanism in 1992, this is a ballsy bet. But Mr Lewis has made money from so many industries – from restaurants, from property, from foreign exchange and from sport – who is to say he won't extend his magic touch to investment banking?
The 70-year-old Briton has been secretly building his stake in Bear Stearns over the past month, using a string of holding companies registered in the Bahamas, where he has been a tax exile since 1979. From nowhere, he is now the bank's largest shareholder, controlling a bigger stake than the company's beleaguered chief executive, Jimmy Cayne, who has been feeling the heat since June, when two Bear Stearns hedge funds collapsed and triggered a financial panic.
According to Forbes magazine, which is the recognised arbiter of these things, Mr Lewis is the world's 369th richest person, with a fortune weighing in at $2.5bn. As a chunk of his net worth, the bet on Bear Stearns is huge – but no more so than the awe-inspiring $1bn-plus positions he has taken on currencies such as the British pound in 1992 and the Mexican peso three years later. He netted hundreds of millions of dollars in profits when the peso collapsed and the Mexican economy had to be bailed out with loans from the US government.
Alongside George Soros, he is one of the most successful currency speculators of his generation, known to many in the foreign exchange world as the Boxer, in reflection of his heavyweight status and after his namesake, the US champion Joe Louis.
Visitors to his Bahamas mansion say that every room has a screen showing the latest foreign exchange prices, and he is still a keen speculator on the markets. Much of his wealth, though, is spread across dozens of industries, funneled mainly through his investment vehicle Tavistock Group, which boasts interests in 170 companies in 15 countries. It is through Tavistock that Mr Lewis has his holding in Enic, which was once envisioned as a holding company for dozens of sports teams and controls Tottenham Hotspur.
Not a bad empire for a self-made man born in London's East End, who dropped out of school at 15 to work at his father's pub-restaurant. Mr Lewis likes to tell the story of how he would lug a bus stop sign from around the corner to outside the restaurant, so that travellers would be more likely to drop in. This and other entrepreneurial ideas helped him turn the family business into a chain that he finally sold in 1979.
Fleeing capital gains tax in the UK, he set up shop as a currency trader in the Bahamas, and has never looked back. Now he has homes in four countries, including in Argentina and in Florida. He has seemingly been able to manage to stay self-effacing and without enemies through his long career. His association with Irish magnates Dermot Desmond, JP McManus and John Magnier got him into hot water over a property deal with the Irish government, but although an inquiry criticised Mr Lewis for failing to co-operate with its investigation, all four were cleared of wrong-doing. A helicopter disaster, where his vehicle exploded, killing the pilot only moments after Mr Lewis disembarked, sparked lots of chatter about assassination plots, but it was soon put down to mechanical causes.
Beyond these occasional headline-grabbing moments, Mr Lewis keeps to himself, and his last major newspaper interview was almost a decade ago. "I really feel that if one is successful, one of the rewards of your success is the quiet enjoyment of it," he told The New York Times in 1998. "The mystery to me is why there's anything of particular interest about me."
The Lewis investment philosophy is "simple", Tavistock says: " Looking for value opportunities where its capital, flexibility, management support and strategic hand can build value." As of last night, Mr Lewis was describing the Bear Stearns purchase as "an investment stake" and staying characteristically tight-lipped about his intentions.
Speculation has swirled that the bank will be hardest hit from the bursting of the credit market bubble of recent years, since it is heavily involved in the origination of the complex debt instruments which have collapsed in value. It is also less geographically diversified than other investment banks, and rumours abound that the company will be taken over or will sell a big stake, perhaps to a Chinese bank.
Whether Mr Cayne's extended tenure as chief executive is in Mr Lewis's plans is unclear, but that talks of "management support" might make the veteran chief executive nervous. Either way, it seems that the bank's fate may once again be resolved on the golf course. As well as their septuagenarian status, the two men share a passion for the sport.
Mr Lewis sponsors an annual charity event between residents of his two gated communities in Orlando, Florida, home to golf legends Tiger Woods and Ernie Els. It was the association between Woods and Mr Lewis that led to the world No 1's appearance at a tiny pro-am golf tournament in Limerick in 2000, and Mr Lewis once bid $1.4m to partner Woods at another charity event. The pair are firm friends. "Any time I have any kind of business venture that I might be leery of, I can run it by him," Tiger Woods said in an interview last year.
For his part, on the day that Bear Stearns was bailing out one of its failing hedge funds to the tune of $3.2bn, Jimmy Cayne was on a New Jersey golf course, shooting an impressive 97. That nonchalant attitude to the credit crisis has made Mr Cayne the butt of Wall Street jokes; whether it will impress his new shareholder remains to be seen.
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