Newspaper article International New York Times

In 3G Capital, Buffett Finds Go-To Partner

Newspaper article International New York Times

In 3G Capital, Buffett Finds Go-To Partner

Article excerpt

Mr. Buffett has made a habit of criticizing rapacious private equity firms over the years, but 3G Capital, he says, is different.

Warren E. Buffett has made a habit of criticizing ruthless Wall Street bankers and rapacious private equity firms over the years. As recently as last month, he railed against both in his annual letter to his shareholders at Berkshire Hathaway.

Yet for Mr. Buffett, a genteel billionaire who has managed to put a friendly face on big business, one private equity firm stands apart from the rest.

3G Capital, the Brazilian private equity firm co-founded by the billionaire financier Jorge Paulo Lemann, has in recent years emerged as Mr. Buffett's preferred business partner in striking multibillion-dollar deals.

On Wednesday, 3G and Berkshire Hathaway teamed up to orchestrate a merger between Kraft, the big processed food maker, and Heinz, which the two companies own. Combining the companies will create a global food and beverage behemoth worth nearly $100 billion.

The deal comes just two years after 3G and Berkshire Hathaway acquired Heinz for $23 billion. And last year, Mr. Buffett lent $3 billion to 3G when another of its companies, Burger King, acquired the Canadian restaurant chain Tim Hortons. In that case, Mr. Buffett essentially provided the leverage for a leveraged buyout.

The success of these deals has resulted in 3G and Mr. Buffett publicly proclaiming their mutual affection for each other.

On Wednesday, 3G's managing partner, Alex Behring, sang the praises of Mr. Buffett while discussing the merger of Heinz and Kraft in a call with investors.

"This partnership has been a key driving factor in Heinz's enormous success to date and will be a key driving factor in the success of the Kraft Heinz Company," he said. "Berkshire is a name that needs no introduction."

Mr. Buffett, speaking on CNBC, was equally effusive about his Brazilian partners.

"I knew they were wonderful going into the Heinz deal," Mr. Buffett said. "In terms of ability, in terms of integrity, every aspect of it. 3G has been a perfect partner."

Yet in many ways, 3G follows the very private equity playbook that Mr. Buffett derides. 3G is known for its relentless cost- cutting and job elimination when it takes over a company. Shortly after 3G and Berkshire acquired Heinz, 11 of the top 12 managers at Heinz were replaced. Since the deal was completed, 7,000 employees have been dismissed.

When 3G took over Burger King, it sold the company jet, scrapped an annual $1 million party at an Italian villa and moved executives at the company's Miami offices from mahogany suites to an open floor of cubicles.

"When they first arrive, it can be pretty ugly for the people working there," said Cristiane Correa, who wrote a book about 3G called "Dream Big." "Their mind-set is: If it doesn't generate any revenue, why are we spending money on that? …

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