High Finance: Gladder to Get Out Than Sorry to Lose Out

When he was kicked out of Manhattan’s Alleghany Corp. two years ago in the most celebrated proxy war in U.S. business, New Jersey Financier Allan P. Kirby, 70, vowed that he would return. Last week it was clear that Kirby was on his way to regaining control of Alleghany, a holding company that controls not only the giant New York Central but Minneapolis’ Investors Diversified Services, the nation’s largest mutual fund complex (assets: $4.1 billion). For John Murchison, 41, and his brother Clint Jr., 39, the Texas wheeler-dealers who unseated Kirby, Alleghany and Kirby had proved too much to handle. Their relief at getting out balanced any regrets that they had about losing out.

Against a Brick Wall. Kirby, who owns 35% of Alleghany shares, blocked the Murchisons’ plans at every turn. Last December, explaining that “I’m tired of hitting my head against a brick wall,” John Murchison sold a huge block of the Murchison shares to Minneapolis Merchant Berlin Gamble, 65, who then replaced John as Alleghany president and tried to make peace with Kirby. Kirby would have none of it. Caught in the middle, Gamble had no place to go but out, so he agreed to sell his 1,500,000 shares to Murray Lincoln, the president of Nationwide Insurance Co. and an ally of Kirby’s. Lincoln’s purchase, plus his own holdings, will give Kirby undisputed control of Alleghany.

Their defeat at Kirby’s hands not only ended the Texas brothers’ march on Wall Street, but will cause some changes in the operation of their $150 million empire. Says one Dallas financial consultant:”The boys got badly burnt. I think they’ll stick to their knitting for a time and stay out of large publicly held companies.” In the past, the brothers’ most successful operations have been in private companies where they held absolute control, could call the shots without being fenced in by the fear of shareholders’ suits and SEC regulations. Admits John: “We’d have some hesitancy now about getting into any more of these involved deals.”

Knitting an Empire. Forgetting Alleghany, the Murchisons are now concentrating on knitting together a huge real estate development empire. When they sold 600,000 shares of Nashville’s Life & Casualty Insurance Co. (current market value: $19 million) last week, it was generally believed that the reason was to raise cash for real estate. In a joint venture with Builder Paul Trousdale, the Murchisons are constructing three huge housing developments in California and two in Hawaii. Their Centex construction outfit in Dallas is already building or has plans to build apartments, military housing or industrial parks in seven states. The Murchisons’ two potentially most profitable projects are New Orleans East, a plant site and residential development that covers one-third of the total area of the city of New Orleans, and Tierra Verde, an 800-acre posh residential complex now being built near St. Petersburg, Fla. In both cases the Murchisons bought swampy land cheaply, are draining it and selling it for fat profits; an acre in New Orleans East for which they paid $300 now goes for $21,600. The brothers have learned that it is easier to move earth and sea than it is to shove old Allan Kirby.