By Julie Jargon, Nicole Friedman and Annie Gasparro 

Brazilian private-equity firm 3G Capital Partners L.P. and billionaire investor Warren Buffett are creating a global food and consumer-goods empire by following a simple formula: buy a company that is concentrated in one market, combine it with another somewhere else and then spread the products across the world.

On Friday they took their biggest swing yet when Kraft Heinz Co., which is partly owned by 3G and Mr. Buffett's Berkshire Hathaway Inc., said it made a $143 billion approach to take over U.K. consumer products giant Unilever PLC. Kraft Heinz later said Unilever has declined the offer, but that "we look forward to working to reach agreement on the terms of a transaction."

If the deal happens, it would cement 3G and Mr. Buffett as the largest global players in food and consumer packaged goods by bringing together household brands such as Kraft Heinz's Oscar Mayer hot dogs and Maxwell House coffee and Unilever's Dove soaps and Surf laundry detergent.

The strategy behind the deal follows a familiar playbook for 3G and Berkshire.

The firms first teamed up in 2013 when they bought ketchup giant H.J. Heinz Co. in a $23 billion deal. At the time, the Pittsburgh-based company generated two-thirds of its sales outside the U.S., with more than 20% in emerging markets. Two years later, in a deal orchestrated by 3G and Mr. Buffett again, Heinz bought U.S.-centric food maker Kraft Foods Group Inc. to create one of the world's largest food and beverage companies.

It isn't clear what role Mr. Buffett might play if Kraft Heinz and Unilever reach a deal. Berkshire could split the cost of the acquisition with 3G and it could also help 3G fund its part of the deal.

As 3G's global ambitions have grown, the Brazilian firm has given Mr. Buffett access to new markets and deals he normally wouldn't do on his own. Unlike Berkshire, which is molded in the image of its folksy chief executive and has a reputation for hands-off ownership, 3G is known for aggressively cutting costs and jobs.

"On the surface, it's inconsistent," said David Kass, a professor at the University of Maryland's Robert H. Smith School of Business and a Berkshire shareholder. "But I think from Buffett's point of view...it's not Berkshire making these operating decisions."

The motivation for Berkshire is that as the firm has grown, Mr. Buffett has struggled to find deals big enough to move the needle on the firm's earnings. Berkshire's subsidiaries, which include insurers, a railroad, utilities and retailers, rapidly pile up cash for their parent company to spend. Mr. Buffett has compared his search for ever-larger deals to elephant hunting.

Mr. Buffett declined to comment Friday through an assistant. A spokesman for 3G didn't return a call seeking comment.

In his 2015 annual letter, Mr. Buffett wrote that Berkshire and 3G both "crave efficiency and detest bureaucracy," but Berkshire seeks those qualities before buying companies and 3G buys companies with the goal of cutting costs. 3G's executives "could not be better partners," he wrote.

Meanwhile, 3G and Mr. Buffett are also becoming a global force in the restaurant industry. When 3G bought Burger King in 2010, the majority of the restaurants were located in the U.S. Since then, 3G has pushed Burger King into Latin America, Europe and the Middle East, making it one of the fastest-growing fast-food chains in the world with a total of more than 15,000 restaurants.

3G teamed up with Mr. Buffett in 2014 when Burger King took over Canadian coffee-and-doughnut chain Tim Hortons Inc. for $11 billion. The company has since brought more Tim Hortons to the U.S. and to new overseas markets such as the Philippines.

At the time of that merger, people familiar with the matter said Burger King wanted to fashion itself after Yum Brands Inc., the owner of Pizza Hut, Taco Bell and KFC, by becoming a holding company with unrelated, separately managed restaurant brands. The tie-up between Burger King and Tim Hortons resulted in a new company called Restaurant Brands International Inc.

 

(END) Dow Jones Newswires

February 18, 2017 02:47 ET (07:47 GMT)

Copyright (c) 2017 Dow Jones & Company, Inc.
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