Unilever Bid Follows Familiar Playbook for Warren Buffett and 3G
February 17 2017 - 6:09PM
Dow Jones News
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 17, 2017 17:54 ET (22:54 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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