Even the foundations have to follow the three partners’ principles and start walking on their own feet and become sustainable, even after the founders have left. “Beto once told me that everything you do that is important in life needs to be institutionalized,” Jorge Gerdau recalled. “If not, it’s as though you have done nothing. I will never forget that phrase.”
Sicupira and Gerdau have known each other since the Banco Garantia days, but they’ve become closer over the last decade. Sicupira’s second initiative in the voluntary sector was the Brava Foundation, which aims to improve public administration. Gerdau began a crusade in 2000 to help state and municipal governments become more efficient. The two businessmen’s paths ran parallel until they crossed in 2007, brought together by Vicente Falconi, Gerdau’s right-hand man in the management shock they gave the public sector. The two men’s pursuit of more efficient public administration has reached the states of Minas Gerais, Rio Grande do Sul, Pernambuco and Rio de Janeiro. The process reached federal level in May 2011, with the creation of the federal government’s Management and Planning Chamber which Gerdau coordinates.
Sicupira keeps to his hands-on style, not content with simply taking part in meetings with governors and government representatives.
“He went to a meeting with police officers in Rio semi-disguised,” said a close acquaintance. “He sat at the back of the room wearing a baseball cap so he would not be recognized, as he wanted to see how a security project was developing at close hand.”
Rio de Janeiro is the state where Sicupira spends most of his time in this effort to improve public administration. The state governor, Sergio Cabral, gave his opinion of Sicupira’s intervention:
“I am privileged to have Beto as a permanent adviser... I know he moves among the various departments and talks to my staff... He arrives in his scruffy old jeans, with his backpack and is the simplest guy in the world although he has all that experience and behaves as though he was one of my assistants... I would say his greatest encouragement [to my government] was in relation to the creation of a policy of meritocracy. This was a great challenge, because Brazil is full of phony egalitarian legislation related to public employees passed over the decades. We had to build ways of finding a meritocratic policy within the prevailing laws...”
The growing involvement by Lemann, Sicupira and Telles in philanthropic initiatives does not mean they have left their business activities on the back burner. They are not satisfied with owning the world’s largest brewer, one of the largest retail chains in Brazil and a fast food chain with a worldwide presence. They want more. It does not matter that Ambev ended 2012 as the most valuable company in Latin America, nor that their main companies – AB InBev (owner of Ambev), Lojas Americanas (owner of B2W), Burger King and São Carlos – have a combined value of over US$ 160 billion. It does not matter that Ambev, Lojas Americanas and São Carlos have had a historic average annual return of 25% under their stewardship. Lemann, Telles and Sicupira are continuing to pursue opportunities, under the constant guidance of their original pillars: meritocracy, cutting costs and continuous improvement.
They aim to use this recipe, tested over the decades, to transform two other recently-acquired companies. The first is Modelo, which makes the Mexican beer Corona and was acquired in June 2012, for US$ 20 billion. The acquisition will expand AB InBev’s lead as the world’s largest brewer over second-placed SABMiller even further.
The second acquisition was the long-established American condiments maker Heinz for US$ 28 billion that was announced in February 2013 – the biggest transaction in the food sector in history. The world was taken aback by the Heinz acquisition, not only because of the amount involved, but also because it turned the Brazilians into the owners of three iconic American brands – Budweiser, Burger King and Heinz. They also became partners of mega-investor Warren Buffett.
Behring and other 3G executives had been tracking the results of the world’s most famous ketchup manufacturer. Even Marc Lemann, Jorge Paulo’s fourth son, was involved in this analysis. He worked briefly as an intern at 3G in the summer of 2009, and was given the task by Behring of analyzing Heinz’s performance. At that time, Marc was 17 and at high school in Switzerland. (He is now studying economics at Columbia University in New York.) He was excited by what he saw and made a short presentation to the 3G team in which he recommended they buy shares in the company, which, at the time, were trading at less than US$ 40. However, instead of following the boy’s opinion, the 3G partners preferred to buy shares in other companies in the food and drinks area.
Three years went by before 3G finally advanced on Heinz. Behring suggested buying control of the American company, an absolute colossus with annual revenues of US$ 11.6 billion, during a conversation with Lemann in the first week of December 2012. He argued that Heinz had a powerful brand, a presence in over 200 countries, and grew by an average of one digit per year. (In Brazil, it is the owner of Quero, based in Goiás.) He felt it had the potential to expand much faster. Lemann was immediately enthusiastic. He would be with Buffett in Colorado within a few days to take part in a workshop with Jim Collins and would present the idea to the Berkshire Hathaway owner.
Lemann outlined his plan to Buffett on December 9, during a flight from Boulder to Omaha, and they both decided to proceed with the deal. Shortly afterwards, Lemann and Behring arranged to have dinner with William Johnson, the chairman of the Heinz board of directors and its CEO. The meeting, which took place in the second half of that month in a restaurant in Florida, marked the start of negotiations. Lemann then stepped back and Behring took charge of the discussions with Heinz.
Soon after the end-of-year party season, Behring headed for Pittsburgh, where Heinz had been headquartered for over a century. The discussions speeded up. Six banks and four law firms were hired by the two sides to structure the operation. Around 300 people ended up being involved.
Buffett accompanied events from a distance. It was only on Monday, February 11, 2013, that he became directly involved. As the deal was about to be struck, he received Behring and Johnson for lunch in a simple restaurant in Omaha. This was all that was needed to settle the deal. Three days later, Berkshire Hathaway and 3G Capital announced they had bought Heinz for US$ 72.50 a share – a premium of 20% over the previous day’s market price. Each firm invested US$ 4.5 billion to assume control of Heinz. (Berkshire spent another US$ 8 billion in preferred shares.)
While the transaction was submitted for legal approval – a process that was to go on until the third quarter of 2013 – Behring and his team were able to get to know how Heinz operated at first hand and plan the changes that would be made should the purchase be authorized.
“Heinz is a long way from being the AB InBev of food (it ranks 13th globally),” read The Economist. “But with Brazilians at the helm and Mr. Buffett in the background it is likely to move up.”
The progress made by Lemann, Telles and Sicupira abroad is unlikely to stop there. People close to the three say other large foreign companies are in their minds. Rumors of a takeover of PepsiCo or Coca-Cola by AB InBev have come and gone over the years. AB InBev has been familiar with PepsiCo for decades, since the former Brahma started distributing its soft drinks in Brazil. In the case of Coca-Cola, the approach could come from another direction – Buffett is the biggest individual shareholder with a 9% stake.
Will Buffett and his friend – and now partner – Lemann get together and buy control of America’s biggest symbol, a company with a market value of almost US$ 169 billion, more than twice its rival PepsiCo?
To his question, Buffett leaned his head back and laughed: “You won’t get anything out of me about that just now.”
Jorge Paulo Lemann as a young man. He studied Economics at Harvard, completing the course in three years. It was there that he realized the need to be surrounded by good people and have ambitious growth plans.
Luciana Leal / Agência O Globo
Luiz Cezar Fernandes, one of Banco Garantia�
��s first and most important partners.
Gazeta Press
Jorge Paulo Lemann, who started playing tennis at 7 and almost went professional.
Paulo Jares / Abril Comunicações S/A
Beto Sicupira, who joined Garantia in 1973 and ran Lojas Americanas when the bank bought the retailer.
Underwater fishing brought partners Beto Sicupira, Marcel Telles and Jorge Paulo Lemann closer in the early years of Garantia (above). They still fish together.
Marco Antônio Teixeira / Agência O Globo
Footballer Raí and basketball player Hortênsia enjoying themselves at Brahma’s VIP Lounge during Rio’s Carnival.
Eurico Dantas / Agência O Globo
Decorations at one of the first events inspired by the “Number 1” slogan.
Márcia Foletto / Agência O Globo
Celebrities like Formula 1 driver Ayrton Senna turned the VIP Lounge into the most sought-after spot in Marquês de Sapucaí’s samba parade ground.
Reprodução / Exame / Abril Comunicações S/A
Cover of Exame magazine in 1999, after Brahma bought Antarctica and created Ambev. The acquisition was the biggest deal ever between Brazilian companies.
Claudio Rossi / Abril Comunicações S/A
Marcel Telles and Victório De Marchi (formerly with Antarctica) became co-chairmen of Ambev’s board of directors.
Germano Luders / Abril Comunicações S/A
Consultant Vicente Falconi arrived at Brahma in the 1990s and has played an important role in the company’s growth since then.
Raul Junior / Abril Comunicações S/A
In March 2004, Belgian company Interbrew bought Ambev. Carlos Brito and Victório De Marchi celebrate the deal in São Paulo.
Herwig Vergult / Epa / EFE / Folhapress
While Marcel Telles and John Brock, then CEO of the European brewing company, announce the deal in Europe.
Jorge Paulo Lemann and wife Suzanna with former President Fernando Henrique Cardoso and Ruth Cardoso in China, in 2008.
While they were visiting the Gobi desert,...
... the news that InBev was preparing an offer to buy Anheuser-Busch leaked on the Internet.
AP Photo / Lauren Victoria Burke
Carlos Brito, then CEO of InBev, goes to Washington to explain the details of the bid to buy Anheuser-Busch to members of Congress. As he was leaving, journalists moved in to question him on the future of the American brewing company.
Claudio Gatti / Abril Comunicações S/A
Brito started working for Garantia in the late 1990s and was one of the first to go to Brahma when it was bought by the bank.
Paulo Fridman
Garantia’s staff in two different moments. Above, in 1996 (from left), Roger Wright, Cláudio Haddad, José Olympio Pereira, Jorge Paulo Lemann, Fernando Prado and Andrew Shores.
Above, get-together lunch for former bank employees in 2010. The picture shows (from left) Armínio Fraga, Rogério Castro Maia, Jorge Paulo Lemann, José Carlos Ramos da Silva and André Lara Resende.
In the same lunch for former bank employees in 2010. Diniz Ferreira Baptista, Eric Hime and Bruno Rocha.
Warren Buffett and Marc Lemann, son of Jorge Paulo Lemann. Marc made a study of Heinz during an internship at 3G in 2009 and recommended buying shares in the company. In 2013, 3G joined forces with Buffett to acquire the food producer for US$28 billion.
Pedro Rubens / Abril Comunicações S/A
Although he has not held an executive position in Ambev for years, Telles is still involved in the company’s management.
Fernando Cavalcanti
For example, he insists on having a hand in the trainee program’s final selection. (He appears in the right-hand corner below.)
Germano Luders / Abril Comunicações S/A
Beto Sicupira in a 2010 photo with the staff of Endeavor, an NGO that supports entrepreneurism, which he had brought to Brazil just over ten years earlier.
Mastrangelo Reino / Folhapress
He has recently worked alongside businessmen like Jorge Gerdau and has also spent time developing projects to improve public administration.
Luiz Fernandes / Andujar Press
Jorge Paulo Lemann still plays tennis every day. In September 2012, he won a senior category tournament in São Paulo
He also follows the main international championship circuit and has come to know players like Roger Federer.
Garantia’s reputation as an aggressive, efficient bank also attracted attention abroad. In 1994, Jorge Paulo Lemann invited former British Prime Minister, Margaret Thatcher to Brazil to meet business leaders.
Stephanie Mitchell / Universidade Harvard
Jorge Paulo Lemann has been increasingly involved in activities connected to education. In 2011, he received Harvard’s president Drew Faust. A meeting with Brazilian President Dilma Rousseff was part of her program.
Sérgio Lima / Folhapress
At 73, the former surfer has become the wealthiest man in Brazil. The management style he launched more than four decades ago has spread worldwide through the companies he has acquired in the United States – AB InBev, Burger King and Heinz.
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DREAM BIG: How the Brazilian Trio behind 3G Capital - Jorge Paulo Lemann, Marcel Telles and Beto Sicupira - acquired Anheuser-Busch, Burger King and Heinz Page 21