As Warren Buffett puts as much as $13 billion into the purchase of HJ Heinz Co. (HNZ:US), the world’s fourth-richest man is relying on three other billionaires to make the deal work.
3G Capital, an investment firm backed by three Brazilian entrepreneurs including the country’s richest man, Jorge Paulo Lemann, will take an equity stake of more than $4 billion, according to people familiar with the deal. Lemann, 73, and his partners Marcel Telles and Carlos Alberto Sicupira previously led the $52 billion merger between Anheuser-Busch Cos. and InBev NV in 2008, and in 2010 orchestrated the $3.3 billion leveraged buyout of Burger King Holdings Inc.
“Buffett has said these guys are the best operators in the world. I agree,” hedge-fund manager William Ackman, whose Pershing Square Capital Management LP owns 11 percent of Burger King after the fast-food chain merged with a company that Ackman co-founded to gain a public listing, said about 3G yesterday. “These guys are long-term holders. They’re not your traditional private equity. They’re spending their own money.”
Lemann, who brought the $23 billion Heinz deal to Buffett, and his partners will oversee the operations of the company. Buffett, 82, who knows Lemann well and previously sat with him on the board of razor-maker Gillette Co (GILGF)., has said before that he favors deals where partners run joint investments.
Berkshire and 3G will pay $72.50 a share for Heinz, a premium to yesterday’s closing price of $60.48. The deal has debt financing from JPMorgan Chase & Co. and Wells Fargo & Co., according to a statement today, and the company’s existing debt will be rolled over, valuing the transaction at $28 billion.
“They’re our partner but it’s their baby from an operational standpoint,” Buffett said today in an interview on CNBC. “Any partnership where I don’t have to do the work is my kind of partnership.”
The trio’s wealth has gained from their previous deals. Anheuser Busch InBev NV (BUD) has gained 136 percent since the transaction was announced in July 2008, reaching a five-year high of 69.94 euros in September. Burger King Worldwide Inc. (BKW) has increased 12 percent since 3G returned it to the New York Stock Exchange in June, trading at a high of $18.13 last month.
Lemann is worth an estimated $19.1 billion, according to the Bloomberg Billionaires Index. Telles, 62, has built a fortune estimated at $8.7 billion, and Sicupira is worth $7.3 billion.
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They have known Lemann since the early 1970s, and together they started 3G in 2004, building on the family office they shared to invest their fortunes.
In 1971, Lemann bought a Rio-based brokerage called Garantia. Using the Goldman Sachs Group Inc. (GS) partnership model as his inspiration, he turned it into Brazil’s premier investment bank. Sicupira and Telles joined him there.
The partners made one of their longest-standing investments in 1982, with the takeover of Lojas Americanas SA, 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, after 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, then 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 year.
Through buyout firm GP Investimentos, which they started in 1993, they also bought, turned around and sold companies such as railroad operator ALL America Latina Logistica SA. (ALLL3) The trio engineered AmBev’s $11 billion merger with Belgium’s Interbrew NV in 2004, the same year they sold GP to junior partners at the firm. They followed that up in 2008 with the $52 billion union with Anheuser-Busch Cos.
In 2010 came Burger King. The trio put up $1.5 billion cash, funded in part by commodities tycoon Eike Batista, according to an official at the Batista’s EBX Group Co. holding company. Last 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.
Lemann and his partners are known for their tough management style, as demonstrated at Burger King, which they bought for $24 a share from Texas-based private-equity firm TPG Capital and other investors and took private in October 2010.
At the time it was acquired, the company was a distant third in revenues and profits behind competitors McDonald’s Corp. and Wendy’s Co. Bernardo Hees, a former chief operating officer of All America Latina Logistica SA (ALLL3), a firm Lemann and his partners once controlled, was named chief executive officer and quickly cut costs, including hundreds of jobs.
“I don’t think I’ve ever seen a better developed management group than the one that Jorge Paulo Lemann has developed over the years in Brazil,” Buffett said today. “He is an incredible guy.”
The son of a Swiss businessman, Lemann was born in Rio de Janeiro in 1939. He graduated from Harvard University in 1961 with an economics degree and briefly was a financial columnist at the Rio newspaper Jornal do Brasil before moving on to work in the brokerage business.
He also 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 after three of his children were almost kidnapped in Sao Paulo in 1999. Lemann makes few public appearances except for charity events.
“Jorge Paulo and I are very good friends and neither he nor I like to think of this as our last deal,” Buffett said today. “We will be buying things.”
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