3G Buys Then Builds as Billionaires Win Praise From Buffett – Bloomberg

(Bloomberg) — For the Brazilian billionaires who built 3G Capital, one major acquisition per industry isn't enough.

They combined Latin American brewers, then engineered an $ 11 billion merger with Belgium's Interbrew NV in 2004. They followed that up in 2008 with the $ 52 billion union with Anheuser-Busch Cos. to form the world's largest beer manufacturer. Last year, 3G-owned Burger King Worldwide Inc. purchased Canadian coffee-and-doughnut chain Tim Hortons Inc.

Now Jorge Paulo Lemann's 3G is in advanced talks to buy Kraft Foods Group Inc. and merge it with H.J. Heinz, according to a person familiar with the matter. 3G took over Heinz two years ago with billionaire Warren Buffett, who has praised their oversight of the ketchup maker.

Heinz is run better under 3G managers "than would be the case if I were in charge," Buffett said in the annual letter to shareholders of his Berkshire Hathaway Inc. last month in which he also praised Lemann. "I knew immediately that this partnership would work well from both a personal and financial standpoint. And it most definitely has."

Consolidation has helped 3G reduce costs and gain leverage over suppliers in their businesses. The company's managers have eliminated more than 7,000 jobs in 20 months after taking over Heinz, with cuts extending from the management ranks to the factory floor, as the ketchup maker announced a plan to shut five plants. The moves helped Heinz boost profit last year even as sales declined.

Kraft has struggled to revive sales growth in the U.S. as younger consumers turn to natural and organic ingredients. The company was created in a 2012 spinoff from Mondelez International Inc., which focuses more on overseas sales and has products including Oreo cookies. Velveeta, Jell-O and Philadelphia Cream Cheese are among the brands at Northfield, Illinois-based Kraft.

"3G has a history of creating world-class operations," said Richard Cook, co-founder of Cook & Bynum Capital Management, which invests in Berkshire. "There's an opportunity to bring that model to Kraft."

Lemann, 75, is worth about $ 27 billion, according to the Bloomberg Billionaires Index. His partners Marcel Telles and Carlos Alberto Sicupira are each worth more than $ 10 billion.

Another 3G manager is Alex Behring, who is chairman of both Heinz and Restaurant Brands International Inc., which was created by Burger King's purchase of Tim Hortons, another deal financed by Buffett. Behring outlined 3G's merger approach last year when discussing the restaurant agreement.

"By bringing these two iconic brands under a single, powerful platform, we will be able to create more value than either company could deliver on its own," Behring said.

To contact the reporter on this story: Dan Kraut in New York at dkraut2@bloomberg.net

To contact the editors responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net Paul Panckhurst, Andreea Papuc