Bloomberg News

Lemann Becomes Brazil’s Richest as Beer Trumps Oil, Gold

December 03, 2012

Lemann Is Brazil’s Richest as Beer and Burgers Best Batista

Brazil’s richest man built his fortune by overseeing takeovers of two icons of U.S. consumer culture: Budweiser beer and the Burger King fast-food chain. Photographer: Jonathan Fickies/Bloomberg

Jorge Paulo Lemann, the banker who now claims the title of Brazil’s richest man, built his fortune by overseeing takeovers of two icons of U.S. consumer culture: Budweiser beer and the Burger King fast-food chain.

The 73-year-old Swiss-Brazilian surpassed commodities tycoon Eike Batista after shares of Anheuser Busch InBev NV, the world’s biggest beer manufacturer, crested 67 euros in trading Nov. 30. Since Burger King Worldwide Inc. returned to being a publicly traded company in June, its stock is up 11 percent. Lemann commands a net worth of $18.9 billion, according to the Bloomberg Billionaires Index, making him the planet’s 36th- richest individual.

The 56-year-old Batista, who has made repeated vows to pass Carlos Slim as the richest man on Earth, has an $18.5 billion fortune. Shares of his six publicly traded natural-resource startups have slumped this year, wiping out almost half of his wealth since March. He ranks 38th in the world.

“The performance of the companies that Lemann controls has been very strong,” said Chris Palmer, who helps manage $2.5 billion of assets as London-based director of global emerging markets for Henderson Global Investors Ltd. “He’s built on the success of his companies in Brazil and partnered with global companies.”

Lemann and his two billionaire partners, Marcel Herrmann Telles and Carlos Alberto Sicupira, orchestrated AB InBev’s $52 billion merger in 2008. Buoyed by steady demand for beer, they’ve seen their fortunes climb more than 50 percent this year after deals such as the $20.1 billion purchase of Mexico’s Grupo Modelo SAB. Lemann’s 10 percent stake in AB InBev is his largest asset, worth $14.6 billion as of the close of trading Nov. 30.

Tennis Career

“Money is simply a way of measuring if the business is going well or not, but money in and of itself doesn’t fascinate me,” Lemann said in January 2008, according to an interview published in HSM Management magazine. He declined to comment for this story.

The son of a Swiss businessman, Lemann was born in Rio de Janeiro in 1939. He graduated from Harvard University with an economics degree in 1961, and spent a brief period of time as a business columnist at the Rio newspaper Jornal do Brasil before moving on to work in the brokerage business.

At the same time, he pursued a professional tennis career. He was a five-time Brazilian national champion and played in the Davis Cup twice, once representing his home country and once Switzerland, where he maintains dual citizenship. He now lives in a suburb of Zurich with his family.

Using Goldman

In 1971, Lemann bought a Rio-based brokerage called Garantia. Using the Goldman Sachs Group Inc. (GS:US) partnership model as his inspiration, he quickly turned it into Brazil’s premier investment bank. Sicupira and Telles joined him there in the early 1970s; today, they share control of a Sao Paulo-based family office and a New York-based buyout firm, 3G Capital Inc.

The partners made one of their longest-standing investments in 1982, with the takeover of Lojas Americanas SA (LAME4), a discount- retail chain that is now among the largest in Brazil. They acquired Cia. Cervejaria Brahma seven years later, in their first foray into the beer industry.

In 1998, following more than $100 million in trading losses on restructured government debt, Garantia was sold to Credit Suisse Group AG (CSGN), netting the partners $675 million in cash and stock. The “three musketeers,” as they are sometimes called, turned their focus to acquisitions. They combined a series of Latin American brewers into Brahma, which became Cia. de Bebidas das Americas, known as AmBev, in 1999. Today, that company, a unit of AB InBev, is Brazil’s biggest by market value, having surpassed state-controlled oil producer Petroleo Brasileiro SA last month.

Burger Buyout

Through buyout firm GP Investimentos, which they founded in 1993, they also bought, turned around and sold companies such as railroad operator ALL America Latina Logistica SA. The trio engineered AmBev’s $11 billion merger with Belgium’s Interbrew NV in 2004, the same year they sold GP to junior partners. They followed that up in 2008, with the $52 billion union with Anheuser-Busch Cos.

The latest move by Lemann, Telles and Sicupira was the leveraged buyout of Burger King in 2010 through 3G Capital. The trio put up $1.5 billion cash, funded in part by Batista, according to an official at the commodities tycoon’s EBX Group Co. holding company, who asked not to be identified because the investment is private. Earlier this year, they sold a 29 percent stake of the fast-food chain for $1.4 billion to William Ackman’s Pershing Square Capital Management LP.

‘Potential, Challenges’

Lemann has donated millions to educational causes, sponsoring eponymous fellowships at Harvard, Columbia, Stanford and Yale, among other universities.

“Jorge Paulo created a whole management culture in Brazil that is extraordinary,” Batista told Bloomberg Markets magazine in an interview last year. “He motivated employees by letting them share the profits -- aggressive, but that leads to results.”

At the time, Batista was richer than Lemann. His wealth peaked at $34.5 billion at the end of March 2012, after he sold a 5.63 percent stake in his commodities empire to Abu Dhabi’s Mubadala Development Co. for $2 billion. In June, amid a bear market for commodities, Batista’s flagship OGX Petroleo & Gas Participacoes SA (OGXP3) cut its initial production targets less than five months after pumping its first barrel of oil. The move sparked a selloff that spread to the rest of his publicly traded companies. He’s lost $4 billion so far this year.

In an e-mailed response to questions, his EBX holding company said it will speed up revenue growth starting in 2013 and 2014, and has close to $9 billion in cash. Batista declined to comment on whether he can reclaim his post from Lemann.

Batista’s closely held ventures now account for the bulk of his fortune. Based on the market value of his publicly traded units at the time, the Mubadala deal valued his closely held companies at about $10 billion. His stake in OGX is worth $4.1 billion.

“Eike has the potential for explosive returns, but it’s also a business full of challenges,” said Palmer, of Henderson. “Lemann’s wealth is compounding and it’s got dividends.”

To contact the reporter on this story: Alexander Cuadros in Sao Paulo at acuadros@bloomberg.net

To contact the editor responsible for this story: Matthew G. Miller at mmiller144@bloomberg.net


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