At the heart of the $23 billion buyout of iconic American company H.J. Heinz Co is a low profile Brazilian group founded by a banker-turned-beer magnate.
3G Capital, which teamed up with Warren Buffett's Berkshire Hathaway Inc for the deal, has aggressively eyed U.S. consumer companies over the last several years.
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The group's founder, billionaire Jorge Paulo Lemann, orchestrated the biggest cash takeover ever when Belgian-Brazilian brewer InBev bought Anheuser-Busch for $52 billion in 2008. 3G also acquired fast-food retailer Burger King Worldwide Inc in 2010 for around $3.3 billion.
The firm often pays rich multiples for deals, according to sources familiar with the transactions. It paid roughly 14 times earnings before interest, taxes, depreciation and amortization for Heinz.
Recent deals in the food and beverage sector have sold for roughly 10 times EBITDA, according to Deloitte.
"These guys have big ambitions and a lot of capital," said one source familiar with 3G.
NO MICKEY MOUSING
3G's approach is similar to Buffett's. Both are interested in well-known brands with large market shares and steady cash flows, sources said.
And like Buffett, who is famously known for quick decisions about whether to take on deals, 3G took a similar strategy with Heinz. The largest packaged foods deal ever came together in just six weeks.
"This was not a fishing expedition that turned into something. They'd done their homework," said a second source familiar with the situation. "They don't Mickey Mouse around."
Following an initial approach from 3G in December, the deal was signed on Thursday, Feb. 14, at around 2:00 am, said another source.
In order to keep the deal silent, code names were used, according to two sources. 3G was called "goose," Heinz was referred to as "penguin" and Berkshire was known as "owl." The news release also refers to the buyer as "Hawk Acquisition Holding Corp".
3G ming use Heinz as a platform for other deals in the food industry, said two other sources, repeating a strategy that successfully turned a regional Latin American brewer into the world's biggest.
And unlike typical financial sponsors, 3G is likely to continue to build a concentrated position within the food industry, rather than looking to diversify, sources said.
Buffett and Lemann served together as directors of razor maker Gillette Co. Buffett considers the man he calls "Georgie Paulo" an old friend.
Lemann, 73, is worth $12 billion, according to Forbes magazine. A Harvard graduate, he was a Brazilian tennis champion before turning to finance.
In the 1970s, Lemann founded Brazilian investment bank Banco de Investimentos Garantia, which was then sold to Credit Suisse First Boston in 1998. He later merged Brazil's largest breweries and sold them to Belgium's Interbrew in 2004. That combination eventually became Anheuser-Busch Inbev SA, which still counts Lemann as a major shareholder and board member. The brewer announced its own mega-merger on Thursday.
Lemann, who moved to Switzerland in 1999 after a kidnapping attempt on his children, co-founded 3G with partners Carlos Alberto Sicupira, Marcel Hermann Telles and Roberto Thompson Motta.
He also brought on managing partner Alexandre Behring, who helped manage both the Heinz and Burger King deals.
On Monday of this week, Behring had lunch with Buffett and Heinz CEO Bill Johnson, one source said. It was not known whether they ate Burger King hamburgers with Heinz ketchup.