Weekend Reading: Rai Sahi of ClubLink

Here’s the story I wrote in 2004 for my Going for the Green series about Rai Sahi. Given Mr. Sahi’s takeover of ClubLink this week, it might interest some of those who follow Canadian golf.

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Buy 30 courses – take up golf: Real estate tycoon and corporate raider Rai Sahi didn’t play till his golf-loving executives pressed him into it

MACTIER, Ont. – Ask Rai Sahi how many hostile takeovers he’s
led and you’ll likely see a big smile creep across his face.

“Apparently I’ve done more hostile takeovers than anyone in
Canada,” he says as we chase his drive down the left side of the
fairway on the opening hole at Rocky Crest Golf Club.

“But I have a different view of it,” he continues. “I’m not hostile
to shareholders, just to the sleepy management that runs these
underperforming companies. I’m only hostile to those that
underperform.”

It is the kind of blunt, matter-of-fact comment Sahi will utter
regularly over the course of a four hour round of golf.

But his track record affords Sahi the opportunity to speak his
mind. He’s been so successful at picking the right opportunities,
with or without the help of a company’s existing management, that
he’s gone from being an unknown who moved to Canada from India in
1971 to a corporate raider and real estate mogul.

Businesses under Sahi’s banner include Morguard Corp. and a real
estate trust under the same name, as well as Tri-White Corp., a
holding company for some of his interests. He has more than
$5-billion in real estate assets under management or in the control
of one of his companies.

Sahi’s also the co-chairman of ClubLink Corp., the golf course
company that owns more than 30 properties, including Rocky Crest,
the track he’s chosen to play in the heartland of Muskoka. It is an
interesting role for a man who until recently only had a passing
interest in the game of golf.

Sahi’s first direct involvement with ClubLink came in the late
summer of 2001, when ClubCorp USA Inc., a U.S.-based golf operator, sought to divest itself of its 25% stake in ClubLink.

Sahi was aware of ClubLink, but turned down ClubCorp.’s initial
offer of $7 a share. Then on Labour Day ClubCorp. came calling
again, Sahi tells me after hitting a line drive off the second tee
that lands on the left side of the fairway.

Sahi had offered $25-million for the ClubLink stock Clubcorp. held,
a significant amount less than its market value. Caught in a cash
crunch, the American golf giant agreed.

“Sometimes my deals have to do with pure opportunity, which is the
case with ClubLink,” he explains a hole later, struggling on the
170-yard sixth, where he hooks a ball into the trees. “But it isn’t
easy to come up with $25-million in a couple of days.”

The deal made Sahi ClubLink’s largest shareholder, but by 2002, he
had grown concerned about the direction of his investment. Thus, in
late 2002 and in his inimitable style, Sahi launched a hostile
takeover in an attempt to acquire the company’s outstanding shares.

The situation finished in a standoff, with the company essentially
divided between three partners, including investor Bob Poile and
Southwest Sun, a London, Ont.-based holding company run by ClubLink
directors Paul Atkinson and Brian Semkowski. For Sahi’s part, he
says the partnership, in which the parties agreed to keep the status
quo and not acquire any additional ClubLink shares, has worked.

There’s no reason for the agreement to change, Sahi says on the
ninth hole, a dramatic downhill par four, even though the deal
finishes in the middle of 2005.

The reality is that ClubLink is just the latest piece of corporate
intrigue led by Sahi since he gave up his job at Bank of Montreal in
1982 to venture into the world of mergers and acquisitions.

Along the way, Sahi bought and sold numerous companies, including
Paul Martin’s Kingsway Transport Group, which resulted in a
continuing friendship with the Prime Minister.

In 1990 he launched his greatest success to that point when he
purchased a stake in Acklands Ltd., a auto-parts distributor that
was hemorrhaging money.

Not everyone was hostile to the deal, Sahi says on the 11th hole, a
beastly 440-yard par four with marshy areas along the left side of
the fairway. “I’d call it semi-hostile. Management certainly didn’t
want it, but the pension funds that were invested in Acklands were
pleased to have me.”

These days Sahi’s biggest interests are in real estate, largely
though Morguard and its real estate income trust. Morguard has its
hands in everything from shopping malls to condos, and is involved
in every major Canadian market.

While his aggressive approach to business has worked in the past
when Sahi was orchestrating a takeover, he says real estate is a
different beast.

“Real estate is a commodity. You don’t find assets that are greatly
undervalued. These days we are selling more assets than we are
buying. We are very cautious. It is our take that the market has
peaked.”

It shouldn’t come as a surprise to anyone that golf wasn’t Sahi’s
sport of choice when he was growing up in India. At that time he was
a wrestler and was good enough to warrant a full scholarship to
Punjab University.

Sahi hasn’t played golf for all that long, taking it up more as a
nod to the other executives at his companies than out of a personal
interest. “A bunch of guys that work for me love to play,” he says
before hitting the ball over the 545-yard par five 12th and chipping
to make bogey. “Selfishly, they wanted me to play.”

These days, given his role at ClubLink and his strategic role at
his other businesses (“I’m more involved in what we’re going to buy
and why,” he explains”), Sahi finds his way out on the links for
around 20 games a year. But he’s not particularly interested in the
game’s nuances, such as putting and chipping, preferring to retreat
to the driving range at Mississaugua Golf and Country Club to pound
balls for an hour.

For our round, Sahi sets up a round at Rocky Crest following a
ClubLink board meeting. The course, created by Canadian golf
architect Tom McBroom, is among the most distinctive in Canada, full of massive outcroppings of rock in fairways and built over land that rolls and falls. Already regarded as one of the best courses in the
country, many expect that over time it will become a classic.

Sahi clubs the ball around Rocky Crest with an unorthodox swing
that is based upon brute force. As a consequence, he hits low liners
off the tee, maxing out at around 230 yards. His dislike of putting
is evident, but he still manages to shoot 94. I card a 75.

Regardless of whether he finds more time to golf in coming years,
don’t expect Sahi, now 58, to mellow as he gets older. This is one
tiger that isn’t about to change his stripes.

“Some people think conducting a hostile takeover isn’t the Canadian
way of doing things,” he says as we finish up the par five closer.
“Maybe they are right, but I’ll tell you I can’t be bothered to
worry about what other people think.”

GREEN GUIDE:

Rai Sahi:

CEO and chairman, Morguard Corp.; chairman, Revenue Properties Co Ltd.; CEO and chairman, Tri-White Corp. and co-chairman, Clublink Corp.

Memberships: Mississaugua Golf and Country Club (Mississauga,
Ont.); Glen Abbey Golf Club (Oakville, Ont.)

Handicap: 22