DREAM BIG: How the Brazilian Trio behind 3G Capital - Jorge Paulo Lemann, Marcel Telles and Beto Sicupira - acquired Anheuser-Busch, Burger King and Heinz

by Cristiane Correa

  “I said we had reached an impasse, as I had been unable to persuade Beto that I didn’t want to go to GP and felt that Fersen was not the right person to take charge of Americanas,” he recalled.

  Lemann responded in the typical style of someone who wants to avoid conflicts at any cost. He looked at Sicupira and Amaral and said: “You are compadres. Sort it out yourselves.”

  The room remained silent for a few seconds. After thinking for a moment, Sicupira said Amaral would go to GP. “No. I’m not,” was Amaral’s reply. This rather hasty announcement took the three partners by surprise. What they did not know was that Amaral already had a new job lined up.

  The formation of the

  triumvirate

  Garantia had 17 partners in 1980. Six of them – Lemann, Lutterbach, Telles, Sicupira, Packard and Fernandes – were members of the executive committee, a kind of hard core that set the bank’s main guidelines. Telles and Sicupira, who were the youngest members of the group, formed a relationship with Lemann over the years that went beyond the professional sphere. Telles learned underwater fishing and, like Sicupira, started fishing with Lemann on weekends. (There was a snide comment at the bank that the way to get ahead was to go fishing with “the boss.”) Lemann appreciated the pair not just for their company as fishermen, but also for the results they brought Garantia. They were in charge of the group’s main businesses at the beginning of that decade. Sicupira was the steamroller in the turnaround of Lojas Americanas. Telles was the man who had run the bank’s trading desk, which was the heart and main source of its revenues. Those who worked with Telles described him as tough but fair. He never shouted, but that did not stop him reprimanding an employee if he felt it was necessary. Clóvis Macedo recalls an occasion when the boss called him over for “a word”:

  “I was unsure about taking an investment decision and thought it was best to wait. When Marcel saw what was happening, he told me that even a broken clock showed the right time twice a day. That was his way of making clear that doing nothing was not an acceptable strategy... A single word or look was enough to understand what Marcel wanted... On a normal day he would sit at the table, put his feet up on the desk and open the newspaper. People used to joke that the paper was upside down and he was not actually reading it at all. When someone said something stupid, he would lower the paper, look at the guy and go back to his reading. That would be enough and we would be afraid of what he would do.”

  Telles and Sicupira raced ahead of everyone else in the group, each with his own style. Despite this, one of the older partners still had a bigger stake than theirs. Fernandes, who had known Lemann from the Libra brokerage days, had become an obstacle to the two younger partners’ progress.

  “There was a time when Beto and Marcel began to feel a bit awkward in the bank,” said a former partner who did not wish to be identified. “Cezar was a kind of common foe who ended up bringing the two of them together.”

  Fernandes had not enjoyed a top-line education like Telles and Sicupira. In contrast to the two younger men who loved sports, he had a more sedentary lifestyle. Although he had tried to learn undersea fishing, he did not take it up. Once Lemann invited him to go fishing in the Cagarras islands, five kilometers off Ipanema beach. Fernandes was seasick and never tried again. He had accumulated considerable wealth after such a long time with Garantia and began to ease back on his work rate. He gradually started losing ground in this tussle for space and was not at all pleased. During a long interview on a hot evening in Rio de Janeiro in February 2012, he spoke about the subject while smoking his ever-present pipe:

  “I could see that the three of them (Lemann, Telles and Sicupira) were united and this bothered me somewhat. I didn’t know if I was jealous or what. Maybe, I was a bit of a maverick, a “complex vira-lata” as Nelson Rodrigues called it. I was not in a good position and it was not comfortable even though I was the bank’s second-largest shareholder with a 10% stake... I had a disagreement, mainly with Beto. I thought we should change our operations a little and get into the asset management area, but he disagreed...”

  With so much in play, it was not easy to make the decision to leave Garantia. Fernandes took three months’ leave in September 1982, but before going, he told Lemann he might not be coming back. He took advantage of the time off to realize an old dream: attend a meeting of the International Monetary Fund.

  “I had never gone because Jorge was totally against the idea and thought it was just a gathering of halfwits,” he said. He met two market acquaintances at the IMF meeting, the economist Paulo Guedes and Renato Bronfman. They began discussing the possibility of setting up a new business. A fourth person, André Jakurski, who was also an economist, joined them shortly afterwards.

  In January the following year, Fernandes told Lemann he intended on setting up a securities distributor. Banco Pactual was founded in 1983 with US$ 200,000. The name came from the initials of its three largest partners, Paulo, André and Cezar (as Fernandes is known on the market). Garantia bought back Fernandes’ shares to be distributed among the partners, mainly the younger ones. From then on, Sicupira and Telles formed a triumvirate with Lemann that would never again be threatened.

  Telles and Sicupira joined the former Garantia in the 1970s. They had spent practically this whole period working closely with Lemann – firstly with very small partnerships and gradually gaining more room. Maintaining a long-lasting partnership like this has been one of their great keys to success. How did they manage it?

  Their roles were clearly established right from the start. Lemann was always the strategist at Garantia, Telles, the head of trading and Sicupira in charge of new businesses. Although a large part of the staff referred to Lemann as the “boss,” as he was always the largest shareholder, Telles and Sicupira had independence. None of them interfered in the work of the other although they swapped ideas and opinions. This same recipe was maintained in all the initiatives that followed Garantia – Lojas Americanas, Brahma, Burger King etc. Whoever is the “owner” of a business makes the decisions and assumes the risks.

  “They have probably had to put up with a lot from each other they did not like, but that never disrupted the business,” said someone close to them.

  For Jorge Gerdau Johannpeter, chairman of the board of directors of the steelmaker Gerdau from southern Brazil, who has known them since the 1980s, the three quickly saw that working together would be a formula for success. “Each one has a different profile, but they recognize that this is one of the triumvirate’s strengths,” he said. “They would probably not have gone so far as they have on their own.”

  This closeness was founded on a series of common values. A conversation with Lemann, Telles and Sicupira will always have the same reference points. The three believe that to be a winner, a company has to recruit good people, preserve meritocracy and share the success amongst the best performers. They all appreciate simplicity and have no time for hierarchy. They are more concerned about building long-lasting companies than appearing on the lists of the world’s richest entrepreneurs. They may have different styles – a former Garantia partner who keeps in touch with them says that, in personal terms, Sicupira is “hard,” Telles is “soft” and Lemann is “soft, soft, soft” – but despite this, their speeches are virtually the same.

  Years earlier, Telles summed up the secret of this ability to get on together: “We always had a common dream... and always respected whoever was handling a business... We let him get on with it. Obviously this means that if the boat sinks, he will go down with it...”

  Mega-investor Warren Buffett, who also has a long-standing partnership – with lawyer Charlie Munger – at Berkshire Hathaway, highlights another factor that upholds the Brazilians’ partnership. He believes they have managed to avoid battles of egos, a common trap many businessmen fall into.

  “You can’t compete with your own partner. You can’t get upset about who gets credit for a deal. The idea that one has to win doesn’t work in any relationsh
ip – in business or a marriage. Not one of this group of Brazilians seeks credit for himself. On the contrary. Jorge Paulo says the success of AB InBev, for example, comes from [Carlos] Brito and his team. This is not common here. Some time ago, the former executive Michael Eisner wrote a book on successful companies [Working Together – Why Great Partnerships Succeed] and had trouble finding 10 cases that really worked [one of the examples was precisely that of Buffett and Munger]... Many people want recognition above all. These people think ‘what’s the point of being on top if there’s no-one below?’ Jorge Paulo and his partners are the opposite of them.”

  The trust between them is such that they wrote a shareholders’ agreement at the beginning of the 2000s – mainly to preserve future relations among their heirs. Establishing the rules that will guide future generations of partners has been a concern for them. The three have a total of 11 children.

  Lemann has been married twice. The first time was in 1966 to Maria de San Tiago Dantas Quental, known as Tote, an attractive, elegant psychoanalyst from Rio’s upper crust. He had three children with her: Anna Victoria, Paulo and Jorge Felipe. They separated in 1986. (Tote died of cancer in 2005.) Under Lemmann’s rules, none of his children could work in any company he controlled. Paulo and Jorge Felipe (known as Pipo) decided to enter the financial market their own way. Paulo owns the investment management firm Pollux. Pipo sold his brokerage, Flow, to Plural bank in 2012. (He remained a partner of Plural.) Anna Victoria was never interested in the world of finance and preferred to study psychology.

  Five years after his separation, Lemann married Susanna, who was from Zurich and had been hired by the Swiss-Brazilian School as a teacher. She barely knew anybody and, shortly after arriving in Brazil, contacted Lemann whose number she had obtained from one of his cousins who lived in the same town.

  Lemann was bowled over by her. She shared his passion for the sporting life – she ran, cycled, got up at the crack of dawn and went to bed early – and she liked to travel to remote places, particularly if she could practice sports there. (Years later, she would open a tourist agency called Matueté.) Three children were born of the marriage: Marc, Lara and Kim. Lemann had eight grandchildren in 2013.

  Telles has two sons – Christian and Max – from his second marriage to Bianka, which ended in 2009. At the end of 2012, he married Fabrizzia Gouveia, his friend for over three decades. His children knew they could never work in their father’s companies, but it was no easy task telling them the rules to which he and his partners had agreed. Years earlier, when he was doing a course at Harvard, Telles decided to take Christian along. The boy, who was 11, was entranced by what he saw of the American university and heard about Ambev. He said it would be great to work for the brewer in the future. That was when Telles told the boy that the company rules forbade this. The best that could be done was for the children to spend a year as trainees and then leave the company. The boy was disappointed and fell quiet after listening to his father’s explanation.

  “How many (Carlos) Britos and João Castro Neves (the Ambev CEO) would exist in the company if relatives could join?” Telles once said about this policy. “We see 70,000 trainee applications every year. Are my genes really so strong that I will create a child who is one in 70,000? I not only don’t believe in genetic miracles but I think this approach would lead to the disappearance of our culture.”

  Sicupira is the only one of them to have been married only once. He married Cecília de Paula Machado in 1979. She is a member of the prominent Guinle de Paula Machado family, which had a wide range of business interests. These extended from the construction and activities of the port of Santos to the creation of Companhia Siderúrgica Nacional and the Copacabana Palace hotel. As the years passed, the Guinle de Paula Machado clan had to sell all its assets, the last of which was Banco Boavista in 1997. Sicupira and his wife have three daughters: Cecília, Helena and Heloísa.

  Although the children of Lemann, Telles and Sicupira do not work in the daily operations of their fathers’ companies, they are being groomed to assume the role of heirs. Their training began early and included a series of activities. All the women have taken accountancy lessons. The younger ones are instructed on how to handle money, which they then have to apply practically via a small investment fund that they run with the help of economist Dany Rappaport. And once a year, all the members of the three families get together for a weekend. These meetings are not only to enable them to get to know each other better, they are also to understand their future roles. Roberto Setúbal, CEO of Itaú Unibanco, and Jorge Gerdau, for example, have been invited to take part and talk about their experiences in family-run businesses. The children are also encouraged to describe what they are doing in their lives as it relates to their education. At the 2011 meeting, Heloísa Sicupira outlined her experience as a trainee at Ambev, speaking of how she was treated like any other member of the program and was not spared the task of carrying beer crates. The only difference in the treatment is that the family members do not undergo the selection process.

  The heirs also began to take seats on the boards of directors. Paulo Alberto Lemann, for example, joined the boards of Ambev and Lojas Americanas. In 2014, he joined the AB InBev board, in place of his father (Jorge Paulo Lemann also has the right to a second seat on the board, currently occupied by Roberto Thompson). Jorge Felipe Lemann is on the boards of São Carlos and B2W, the electronic retail company controlled by Lojas Americanas. Cecília Sicupira Giusti is on the Lojas Americanas board and is a substitute member of the São Carlos board.

  The partners hope all this preparation will allow their heirs to keep the companies their fathers built up sustainable in the long term. Lemann and his partners’ assets are split among them in proportions depending on the companies. Their joint stake in AB InBev, for example, amounts to 18.62%. Lemann has 10.31% of the total capital (his shares are divided evenly between his two families) while Telles has 4.6% and Sicupira 3.71%. Lemann has 19.89% of Lojas Americanas shares, Sicupira 14.67% and Telles 9.43%, giving them a total stake of 43.99%. São Carlos is the only company where Telles and Sicupira have an equal stake, of 16.86% each, while Lemann has 20.13%. Their combined share amounts to 53.85% of the total capital.

  “Our investment is worth more as a block than if it was dispersed,” Lemann once said. “All this training is a way to enable the heirs to stay together, be proud of their wealth and defend it.”

  The rib of Garantia

  If the departure of Fernandes from Garantia represented the definite formation of the triumvirate of Lemann, Telles and Sicupira, the change also gave Fernandes an opportunity to create an institution from scratch and develop his own “big dream.” His choice was to copy the Garantia culture.

  As the controller of Pactual, Fernandes took everything he had learned with Lemann to the new bank. Meritocracy, partnership, competitive environment, half-yearly evaluations, aggressive bonuses, all this was adopted by the new institution. This model was maintained by Pactual until it was sold to the Swiss bank UBS in 2006. Gilberto Sayão knew this way of working as an insider. He joined Pactual in 1991 as an intern, shortly after graduating from the PUC University in Rio. Three years later, he was one of the partners. By 2012, when he was 41, Sayão was in charge of the asset management firm Vinci Partners. He spoke about the similarities between Garantia and the bank where he worked for almost two decades:

  “The concepts of partnership and meritocracy were the backbone of Garantia as well as Pactual. There was nowhere in Brazil where this business of offering you a partnership, aggressive bonus, a low fixed salary but a very high variable existed. There was nowhere you would take a young guy without experience, as in my case in the bank, and give him an opportunity. Pactual was like Garantia, and you were eligible for a bonus right from the start. If anybody were to ask about my salary at that time, I wouldn’t even remember it. The main point was the bonus. Afterwards, you could become an associate and then a partner and buy shares loaned by the bank’s tr
easury and pay for them with future bonuses. This was the same model as Garantia. Furthermore, there was no kind of perks at all. Car? Club membership? Forget it. It was about money, get it? And you can do what you want with your own money.”

  For banks like Garantia and the newly-created Pactual, Brazil’s economic instability in the 1980s represented a tremendous opportunity. They had to deal with a veritable series of economic plans (Cruzado in 1986, Bresser in 1987, Summer in 1989 and Collor in 1990), changes in the currency (from cruzeiro to cruzado, from cruzado to cruzado novo, from cruzado novo to cruzeiro) and a hyperinflation that hit an incredible 1,973% in 1989. Whereas the Brazilian’s average income remained virtually flat in the period, banks gained money by the bucketful – mainly by financing the government’s debt.

  Against this backdrop, Pactual took off. Its annual average growth in the first 10 years was 33% and Fernandes’ personal assets were in the range of US$ 600 million. Everything indicated that his decision to leave Garantia and set up Pactual had been the right one. In his new institution, Fernandes showed the market his talent as a creative and daring banker.

  He also had the chance to get his own back on Sicupira, with whom he had argued on quitting Garantia.

  When Amaral, at that time the CEO of Lojas Americanas, warned Lemann, Telles and Sicupira that he would not work at GP Investimentos, he had not told them he already had another job in mind. Fernandes had invited him to restructure Mesbla, which had filed for bankruptcy, leaving 1,600 creditors out of pocket, including Pactual. Amaral, who knew about the argument between Fernandes and Sicupira, thought it was best not to tell his friend about his new professional destination. He informed the controllers of Lojas Americanas that he wanted to leave the company and agreed to carry out the transition with Sicupira’s choice, Fersen Lambranho.