Jorge Paulo Lemann and his partners have made billions in banking, Brazilian beer and burgers. Their next windfall will come from window shades.
By Hank Tucker, Forbes Staff
One of Alexandre Behring’s favorite pastimes, often alongside the three other billionaire co-founders of 3G Capital, is to go spearfishing in locales like the Bahamas or Frying Pan Shoals on the North Carolina coast, where large species of grouper, snapper and mackerel are plentiful.
It’s a primal hobby. Spearfishers dive into the sea armed with spearguns to hunt their prey and have to use their ammunition wisely. Pulling the trigger sends a spear shooting out of the barrel for a lethal strike, if it’s done correctly.
“You have to be calm and resilient to look at a lot of small fish that are not special, and then recognize when there’s a really special fish that swims by,” says Behring, who once held the world record for Mahi-Mahi by spearing a 62-pound fish in Brazil in 2007. “It’s not going to hang around for a long time, so you have to be able to make a decision and shoot quickly.”
That’s the philosophy Behring, 3G’s 57-year-old co-managing partner, has carried into his investing career, too. 3G, with $14 billion in assets under management as of the end of 2023 according to an SEC filing, is unlike most private equity peers in that it has only made a small handful of investments in its 20-year history. The majority of 3G’s assets are its partners’ own capital, stemming from a fortune in investment banking in Brazil, and its funds are open to only a select few external wealthy families including the likes of Warren Buffett and Bill Ackman. There’s no hurry to exit a business, or to make a new acquisition, even as dividends pile up from its current holdings.
The firm’s first and most successful platform investment was an acquisition of Burger King for a little more than $1 billion in equity in 2010. 3G’s Burger King investment has turned into a 28-fold return including dividends, and has amounted to $20 billion in gains for the firm after accounting for some realized gains over the years. The company is now called Restaurant Brands International, and 3G’s remaining 27% stake is worth about $9 billion. 3G’s acquisitions and subsequent $45 billion merger of Heinz and Kraft in partnership with Buffett’s Berkshire Hathaway were less successful, though it still earned a positive return by the time 3G fully exited Kraft Heinz last year.
The exclusive buyout firm’s latest acquisition was a $7.1 billion deal in February 2022 to buy a controlling stake of Dutch window blinds and coverings maker Hunter Douglas. It’s shaping up to be another windfall. Behring says 3G has already turned down an offer for a minority stake at a valuation that would amount to “somewhere between a double and a triple, and closer to a triple.”
“This is about as concentrated as any investing approach you’re going to find. It’s big checks for us and big checks for the people close to us,” says Behring. “When things pan out well, as they have thankfully most of the time, we’ll make multiple times their money. They’re bound to not pan out as well from time to time, and when that happens, you can’t lose the money.”
3G was founded in 2004 by Behring along with Jorge Paulo Lemann, Carlos “Beto” Sicupira and Marcel Herrmann Telles, who together now have an estimated $43 billion in combined wealth. The firm was seeded when Lemann, a former professional tennis player who competed at Wimbledon in the 1960s, founded Banco Garantia in 1971 and built it into Brazil’s largest investment bank with the help of Sicupira and Telles, selling it to Credit Suisse for $675 million in 1998.
Behring was a student at Harvard Business School in 1994 when he met Sicupira giving a guest lecture and began working with the trio on their personal investments. By 1998, he was the CEO of America Latina Logistica, which operated Brazil’s largest rail network, and restored it to profitability before taking it public in 2004.
After that success, Behring moved to New York with ambitions to expand beyond Brazil and in 2004 started 3G, a name derived from “three garotos,” the Portuguese word for “boys,” reflecting the decades-long partnership between Lemann, Sicupira and Telles. The firm spent its first few years expanding the group’s personal beer empire (with brands such as Brahma and Interbrew) and engineering the buyout of Anheuser-Busch that formed AB InBev, the largest brewer in the world.
All the while, 3G was looking for a new business to turn around from the ground up, combing through screens of hundreds of businesses with low Ebitda multiples that were worth under $5 billion. Daniel Schwartz, a young partner who Behring had plucked from stints at Credit Suisse and a hedge fund, noticed Burger King after doing a screen in the fall of 2009 and pitched it to Behring, confident it could be run much more efficiently.
“Burger King is an iconic brand that at the time had been around over 50 years,” says Schwartz, 43. “We couldn’t believe this business was only generating around $400 million in Ebitda with 12,000 restaurants in 100 countries.”
Behring had spent every summer growing up at his aunt’s house in Miami addicted to Burger King Whoppers—he shows off a letter he wrote back to his parents as a 7-year-old exulting that he had lunch there every day—so it was an easier sell than Schwartz expected. They only had to put in around $1 billion of equity in a deal to take Burger King private at a $4 billion enterprise value and quickly cut costs by selling most company-owned stores to franchisees and cutting down on everything from office supply orders to selling the company jet. They also expanded rapidly in countries like China and India and accelerated its pace of opening new locations.
Schwartz says Burger King’s cash flow tripled in just a couple of years, and 3G took it public again in 2012 but held on to a majority stake. Instead of cashing out, they re-levered all their gains into a $11.4 billion deal for Tim Hortons, a Canadian coffee chain, and renamed the business Restaurant Brands International. The deal included $3 billion in financing from Berkshire Hathaway shortly after 3G had partnered with Buffett on the Heinz buyout.
“I sent eight or 10 slides depicting the Tim Hortons business and what we intended to do to him and we hopped on the phone to talk about it, and the first thing he said was this was one of the better businesses that he ever saw,” says Behring. “Hearing Warren say that, with his encyclopedic knowledge of business in North America was super reassuring.”
A $1.8 billion deal for Popeyes followed in 2017. Buoyed by the launch of its chicken sandwich, which drove 38% growth in the fourth quarter of 2019 alone, the chain surpassed KFC in sales last year and has tripled its Ebitda since the acquisition. Three years ago, RBI spent $1 billion on Firehouse Subs to add sub sandwiches to its portfolio. Schwartz and Behring say they’re committed to staying in the business long-term, though the stock has underperformed since 2018, and recruited former Domino’s CEO Patrick Doyle to become its chairman in 2022.
But Schwartz and Behring’s day-to-day focus now is more on Hunter Douglas. After running Restaurant Brands as CEO for six years, Schwartz moved back to 3G full-time in 2019 to help it track down its next big fish. They had been following Netherland’s-based Hunter Douglas, which had been family-owned and managed by three generations of Sonnenbergs for 100 years, and grew convinced that it was underappreciated. As a publicly-traded company, its float on the Amsterdam exchange was low, and it idled under the radar of most analysts.
3G announced the $7.1 billion deal in late December 2021 at a 73% premium to Hunter Douglas’ share price, and it closed in February 2022. The firm acquired 75% of the business, with the Sonnenberg family retaining the rest, and 3G partner João Castro Neves stepped in as its CEO.
As a seller of window coverings, including Levolor blinds, Hunter Douglas appears to be a departure from 3G’s track record of food and beverage companies, but Behring and Schwartz say there are parallels as an easy-to-understand consumer business that’s the dominant player in its category. They’ve made the company more efficient by creating a global procurement organization to reduce supply chain costs since different units of the business weren’t integrated with each other, and they’re expanding beyond Western Europe and North America to make its products ubiquitous around the world.
“Many of the things that worked out well at Burger King, we’re now applying similarly at HD,” says Schwartz.
Schwartz says 3G has no plans to sell anytime soon while it “patiently” looks for its next big platform acquisition. The firm’s leaders are staying tight-lipped on what that could be or how long it could take.
“I don’t think we’ll deviate from the approach that we have employed over these years,” says Behring. “Find a great business, try to build an ownership team and culture, improve efficiencies in the short-term, generate organic growth in the medium-term and and grow through M&A more in the medium- to long-term.”
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