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An interesting part of the story about 3G, is that it operates in a much more target rich environment than Berkshire.

Restaurant Brands International

In 2010, 3G Capital purchased Burger King Holdings in a leveraged buyout for $3.3 billion. At Burger King, earnings had been slipping for two years, and 3G got a fair price, valuing Burger King at 9 times EBITA which was typical of restaurant deals at the time, thereby taking the firm private.

Once the deal closed in October 2010, the new CEO, 3G veteran Bernardo Hees, cut 375 people from the Miami headquarters and 275 more around the world. Daniel Schwartz, deputy chief financial officer, then began with some serious cutting. He sold the corporate jet, eliminated the fancy executive offices in Miami, and terminated the annual $1 million bash that the company’s Europe; Middle East Africa division had been throwing at chateau beside an Italian lake.

Schwarz, a classic 3G hire, grew up just outside of Queens NY and was an honor student at Cornell. He was described as bright and very hard working and with big dreams. After college, he worked at Credit Suisse First Boston and a hedge fund. In 2005, upon learning that 3G was opening an office in New York, he applied for a job. He was hired at the age of 24 and was eventually elevated to the private equity group. In 2010, Schwartz proposed the idea that 3G purchase Burger King.
While at Burger King in 2011, as Chief Financial Officer Schwartz was in charge of selling off company owned restaurants to franchise holders and closing unprofitable units, dropping the corporate headcount from 38,884 to 2,425.

In June 2013, Burger King named 32 year old Schwartz as CEO, succeeding Bernardo Haas, who moved on to run Heinz. True to 3G’s philosophy, his salary was set at $700,000, with a potential cash bonus of $1,500,000.
By 2014, Burger King had roughly doubled the Burger King’s cash and sold a 30% stake to Pershing Square Capital for $1.4 billion, taking the company public again. 3G provided $1.2 billion cash for the original purchase and leveraged the rest. The sale to Achman netted 3G $200 million more that their original purchase price, and left them still holding 70% of the company, which by the summer of 2014 was worth $9 billion. So, 3G made a gain equal to 70% of $9 billion with nothing down?

In August 2014, Burger King purchased Tim Hortons for $11 billion with the help of $3 billion from Buffett. On the day of the Tim Horton purchase, 3G’s 70% stub was worth $8 billon. The name of the combined company was changed to Restaurant Brands International.

After the merger with Tim Hortons, William Ackman’s Pershing Square Capital Management owns 19% of Restaurant Brands. Achman has also invested his personal money in the 3 G Capital.

Kraft Heinz Company

In February 2013, Berkshire Hathaway joined 3G Capital Management in a new venture. They agreed to pay $72.50 a share, or $23.3 billion, for H.J.Heinz in a deal valued at $28 billion. Berkshire and 3G each put up $4.4 billion in equity for the deal, along with debt financing from JPMorgan Chase and Wells Fargo. Berkshire is also buying $8 billion of preferred stock that pays 9 percent. The deal is expected to close in the third quarter of this year.

"This is my kind of deal and my kind of partner," Warren Buffett said. "Heinz is our kind of company with fantastic brands." He added. This deal is a dramatic change in direction for Buffett whose historic approach has been to buy whole companies and leave existing management in place, whereas 3G’s approach is to install new management, a new culture and dramatically cut costs.

In addition to its namesake ketchup, Heinz owns Ore-Ida potatoes, Lea & Perrins Worcestershire sauce and Classico pasta sauce.
In March 2015, H.J Heinz announced that it was merging with Kraft Foods in a deal that valued Kraft at $46 billion. Berkshire would own about 27 percent of the combined company, but 3G would oversee day-to-day operations. Kraft brands include its namesake cheese, Oscar Mayer cold cuts and Maxwell House coffee.

The merger will provide costs saving that are estimated to amount to $1.5 billion by the end of 2017, shutting down less efficient manufacturing facilities, reducing head count, and refinancing high cost debt.

Other synergies that the combination of these two large food companies should provide include better economies of scale in the North American market, and the ability to get more shelf-space in retail stores. The merger will also provide the opportunity for Kraft to increase their international sales, given Heinz’s global footprint. While Kraft derives 98% of its sales from North America, Heinz derives 60% of its sales from regions other than North America, with emerging economies contributing 25% of its sales.

Target Rich

Buffett is facing an environment where cash is pouring into Omaha faster than he can find investment opportunities, using his traditional sources, and he says that he likes the 3G culture. It has a strong Buffett influence in that they are trying to build are companies with strong competitive advantage, a culture that can endure for the long term. Their approach to building this moat is different than the traditional Berkshire approach for finding companies with strong management in place.

3Gs culture has been successful when inserted into companies than have become too large and complacent like Budweiser, Burger King and Heinz. How many more targets might exist? Consider the limited number of companies with a durable competitive advantage in place, and the fact the larger a company gets the more difficult it is to sustain their edge. Success breeds competition, and attracting and retaining great personnel is a challenge for most companies: Level 5 CEOs retire or die, and good managers get cherry-picked by a competitor for more money or a better challenge. For every company operating within good management in place, there are likely ten that need help.

For Berkshire, 3G offers an alternative source of investment opportunities, in that they operate in much more target rich environment than the one from which Berkshire traditionally selects its acquisitions.
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