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Profile of Buffett's Billionaire Brazilian Partner

August 30, 2013
Canadian Value

Canadian Value

109 followers
After they sold H.J. Heinz to Warren Buffett and a bunch of Brazilians in June, the ketchup manufacturer’s outgoing board of directors met for dinner at Pittsburgh’s Duquesne Club to congratulate themselves on a job well done. Twenty-three billion dollars had just changed hands. The takeover price, at $72.50 a share, was almost 20 percent higher than the company’s recent all-time high. “We said we’re all going to miss each other, but we felt we had done right by the shareholders,” says Dean O’Hare, who’d sat on the board since 2000. Heinz is an institution in Pittsburgh—the Steelers play at Heinz Field, locals of means like to get married at Heinz Memorial Chapel—and Buffett’s presence allayed fears that the 144-year-old company would be dismantled. “Seeing the name on the letter was very important to us,” O’Hare says.

The only really un-Buffettlike aspect of the deal, other than the high price, was the Brazilians. Not because of their nationality, but because they were the principals at 3G Capital, an investment firm best known for the leveraged buyout of Burger King in 2010. Had the Oracle of Omaha changed his mind on private equity, which he once compared to a porn shop? At Berkshire Hathaway’s (BRK/A) annual shareholders’ meeting in May, Buffett explained why he seemed to be breaking his own rules: his confidence in 3G’s 74-year-old chief investor and strategist, Jorge Paulo Lemann. He called Lemann “classy.” As a sign of Buffett’s esteem, 3G and Berkshire have equal stakes in Heinz despite Berkshire putting up three times as much cash. Heinz, Buffett said, would be Lemann’s show.

In the U.S., Lemann is virtually unknown, even though he and his two longtime partners, Marcel Herrmann Telles and Carlos Alberto Sicupira, now control three icons of U.S. consumer culture: Heinz ketchup, Burger King, and, after the $52 billion takeover of Anheuser-Busch in 2008, Budweiser beer. The combined market value of the companies they run is $187 billion—larger than that ofCitigroup (C).

In Brazil, Lemann is a business-class hero. He’s the wiry, white-haired conglomerateur who’s part Buffett, part Sam Walton, part Roger Federer. (In his younger days he was a five-time Brazilian national tennis champion.) “Lemann” is shorthand for pitiless efficiency. Last year he became the richest man in Brazil, taking the title from oil and mining tycoon Eike Batista, whose empire has since collapsed. Worth some $20 billion, Lemann is No. 32 on the Bloomberg Billionaires Index, seven slots behind George Soros and three ahead of Carl Icahn. Arminio Fraga, who worked under Lemann in the 1980s, later served as central bank chief, and now runs one of the country’s largest asset-management firms, is one of a generation of Brazilian entrepreneurs who look up to Lemann. “He carried out a revolution in the way people think about business,” Fraga says.

Lemann and his partners founded 3G in New York in 2004 to buy U.S. companies with the cash they’d earned from more than two decades of takeovers and turnarounds in Brazil. The name is a reference to the number of principals in the firm (the Brazilian press often calls Lemann, Telles, and Sicupira the three musketeers) and to Banco Garantia, the investment bank where they developed their management philosophy. Starting in the 1970s, Lemann built Garantia into Brazil’s premier financial firm. Since selling the bank to Credit Suisse (CS) in 1998, he and his partners have focused on acquisitions outside the financial industry, such as Heinz.

Lemann declined to be interviewed for this article. When contacted by Bloomberg Businessweek, some of his friends and business associates said they’d been asked by Lemann not to speak with journalists about him. Heinz likewise declined to make its executives available for comment, though a handful of press releases since June 7, when the company’s shares ceased trading and Heinz officially went private, hint at the sort of shake-ups that Lemann and his partners specialize in.

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Canadian Value
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