By: Joseph Miller
Brazil’s richest citizen, Jorge Paulo Lemann, may not be a household name in America yet, but the brands he controls are icons of U.S. consumer culture around the world. With his two longtime partners Marcel Telles and Carlos Sicupira, Lemann runs the makers of Budweiser beer, the Whopper and even Heinz ketchup. The combined market value of the companies they run is $187 billion—larger than that of Citigroup.
Lemann made international headlines when he partnered with Warren Buffet in the largest deal in the food industry’s history, the $23 billion acquisition of Heinz, the 144-year-old American iconic brand.
Buffet is excited to partner with Lemann, “this is my kind of deal and my kind of partner… I want to learn more about Brazil and Jorge [Paulo Lemann] is a great professor,” said the Oracle of Omaha.
Worth an estimated $17.8 billion as of FORBES’ last World’s Billionaires list, Lemann come up with the idea to buy Heinz and brought it up to Buffett. Longtime friends, the two first met a decade ago when both served on the board of Gillette. Buffett was on the board because Berkshire then owned close to 10% of Gillette. Lemann’s primary business affiliation at the time was with the Brazilian brewery AmBev.
With Lemann leading the drive, AmBev merged with Belgium’s Interbrew to form InBev. Few years late, he made headlines when Inbev acquired Anheuser-Busch (Budweiser´s maker) for $52 billion. The amalgamation of all of these companies formed Anheuser-Busch InBev BUD, the world’s largest brewer, in which the billionaire holds a 10% stake and remains a powerful force. Berkshire Hathaway also held a significant stake in Anheuser-Busch before InBev’s takeover bid, which Buffett regrettably believed would fail.
In 2004, Lemann and his partners founded the company 3G Capital in New York to buy U.S. companies with the cash they would earned from more than two decades of takeovers and turnarounds in Brazil.
Lemann´s appetite for American companies emerged once again in 2010, when he, Telles and Sicupira, through 3G Capital, bought Burger King Holdings for $3.3 billion. The chain, fortunate to say, is a large user of Heinz ketchup.
Beyond that cameo example of good judgment, the Lemann troops are known for their tight control of costs and for their focus on creating long-term value. Buffett is in general a great admirer of how his friend — “Georgie Paulo,” as Buffett calls him — manages his businesses.
At Berkshire Hathaway’s (BRK/A) annual shareholders’ meeting, Buffett explained his confidence in 3G’s 74-year-old chief investor and strategist. 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.
The company’s shares ceased trading and Heinz officially went private, hint at the sort of shake-ups that Lemann and his partners are specialize.
Their first move was to replace Heinz’s long-serving chief executive officer, William Johnson, with Bernardo Hees, a former Brazilian railroad executive who had most recently run Burger King (BKW), where is forbidden to make color copies without permission. At Anheuser, employees no longer have access to free beer. According to a book published in Brazil this year, Sonho Grande (Big Dream), Lemann’s partner Sicupira has a favorite phrase: “Costs are like fingernails: You have to cut them constantly.”
The formula has done wonders for the profitability of Anheuser-Busch InBev (Budweiser); its stock price has increased about 150 percent in the past five years. In two years, Burger King doubled its margins as measured by Ebitda and is already value at more than twice the $3.3 billion Lemann bought it for in 2010.
Lemann is No. 32 on the Bloomberg Billionaires Index, seven slots behind George Soros and three ahead of Carl Icahn. The Harvard-educated former tennis player, who once played in the Wimbledon championship tournament, has become a major player on the global mergers-and-acquisition stage, something that also reflects the rise of Brazil as an economic power. People in the U.S. are moved by the American dream, but Lemann as soon as he fulfills one dream; he is on to the next.
According to Lemann´s biography book – Big Dream, there is a reason why Lemann and Buffett are becoming even closer and start doing more business together: they could be considering the takeover of the most iconic of American brands, none other than Coca-Cola. In which Buffett’s Berkshire Hathaway is already the largest shareholder, with a 9% stake. In Berkshire Hathaway’s annual report, Buffet said, “With the Heinz purchase, moreover, we created a partnership template that may be used by Berkshire in future acquisitions of size.”
Considering the two men’s reputations and respective histories, it is fair to say that The Oracle of Omaha may indeed have found his soul mate in business, since they share the same simple values and are not afraid of dreaming big.
Joseph Miller is a freelance writer with experience in reporting about finance/business, economy and entrepreneurship