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DealBook: The Brazilians Behind the Heinz Deal

February 15, 2013 by Leave a Comment

3G Capital took Burger King Holdings private in 2010.LM Otero/Associated Press3G Capital Management took Burger King Holdings private in 2010.

Warren E. Buffett’s $23 billion acquisition of H. J. Heinz, a quintessentially American company, is almost a caricature of a Buffett acquisition.

But Mr. Buffett’s partner in the deal, the Brazilian-backed investment firm 3G Capital Management, has also shown a craving for iconic American businesses.

3G, whose principal owner is the billionaire financier Jorge Paulo Lemann, adds ketchup to a portfolio that has included burgers and beer. Mr. Lemann played a major role in the multibillion-dollar merger of the Brazilian-Belgian beer giant InBev with Anheuser-Busch.

And in 2010, 3G took Burger King Holdings private in a leveraged buyout valued at about $3.3 billion. In April, just 18 months after taking it private, 3G sold shares of Burger King back to the public, but still retains majority ownership of the company. The firm has also previously invested in Wendy’s.

The ascendance of 3G and Mr. Lemann as major players on the global mergers-and-acquisition stage reflects the rise of Brazil as an economic power. Armed with strong balance sheets and a growing domestic economy, Brazilian companies have emerged as prominent buyers of American companies. In 2009, for instance, the Brazilian beef company JBS paid $800 million for a majority stake in Pilgrim’s Pride, the Texas chicken company.

Mr. Lemann, 73, who is worth $19.1 billion, according to the Bloomberg Billionaires Index, is said to have come up with the idea to buy Heinz and brought it to his friend Mr. Buffett. The two men have known each other for decades, having served together on the board of Gillette. Berkshire Hathaway is also a large shareholder of Anheuser-Busch InBev. Mr. Lemann and his partners serve on the Anheuser-Busch InBev board.

Mr. Lemann, whose Swiss father emigrated to Brazil a century ago, is a former Brazilian tennis champion who played at Wimbledon. He has lived in Switzerland since 1999, after an attempted kidnapping of his children.

He has been a major player in Brazil since the 1970s, when he acquired a small financial firm and built it into Banco de Investimentos Garantia, one of Brazil’s largest investment banks. Credit Suisse acquired his company for about $675 million in 1998. He and his business partners also gained control of a Brazilian brewery and built it into AmBev, one of the world’s largest beer companies.

The point person on the transaction for 3G, which houses its investment operations in New York, is Alexandre Behring. Known as Alex, Mr. Behring is a Brazilian native who graduated from Harvard Business School in 1995 and lives in Greenwich, Conn.

Another tidbit about 3G: for several years, it employed Marc Mezvinsky, the husband of Chelsea Clinton. Mr. Mezvinsky left 3G in 2011 and has since set up is own hedge fund.

Article source: http://dealbook.nytimes.com/2013/02/14/the-brazilians-behind-the-heinz-deal/?partner=rss&emc=rss

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Partner Could Gain Control of Mets in 3 Years

May 29, 2011 by Leave a Comment

Einhorn is expected to receive a one-third share of the Mets in return for his investment, but could gain much more. He will have the option in three years of raising his stake to 60 percent, effectively ending more than three decades of control of the team by the Wilpon family.

Fred Wilpon, the principal owner, could block a move to take over his team by repaying the $200 million invested by Einhorn. But Einhorn would then retain his one-third share of the team, essentially at no net cost, according to the person with direct knowledge of the negotiations, who spoke on the condition of anonymity because he was not authorized to publicly discuss the matter.

Steve Greenberg, the investment banker hired by the Wilpons to sell a minority stake in the Mets, declined to comment. Rob Manfred, executive vice president of Major League Baseball, also declined to discuss the deal. A spokesman for Einhorn said he had no comment. In a statement, the Mets said their exclusive negotiating agreement with Einhorn, who attended Saturday night’s game at Citi Field and spoke to Manager Terry Collins in the dugout, was “strictly confidential.” They later issued a second statement saying “there is uninformed speculation regarding terms of a potential deal.”

It is unclear what Einhorn would have to pay to increase his stake in the team to 60 percent in three years. Customarily, an auditor would be hired to revalue the franchise to determine the basis for negotiations over a price.

The deal now being discussed between Einhorn and the Mets does not include a stake in SNY, the team’s profitable cable television network. Einhorn said Thursday that he was not interested in the television business, unlike many other bidders for the team.

The outline of the proposed deal was first reported by ESPNNewYork.com.

Though the deal is not final and is subject to the approval of Major League Baseball, its terms underscore the vulnerability of the Wilpons, whose team is swimming in debt, bleeding cash and losing fans. Wilpon said it could lose about $70 million this year, $20 million more than last year.

The Mets are also embroiled in a legal battle with Irving H. Picard, the trustee representing the victims of the fraud in Bernard L. Madoff’s Ponzi scheme, who is seeking $1 billion from the Wilpon family.

Einhorn, 42, is expected to seek legal indemnity from that case, which is being mediated by Mario M. Cuomo, the former governor of New York. Einhorn is also likely to clarify what role he would have if the Mets were forced to sell the club.

The potential agreement with Einhorn “certainly demonstrates a desperate need for immediate cash by Wilpon,” said Marc Ganis, the president of SportsCorp, an industry advisory firm. Einhorn, on the other hand, was striking a clever deal, he said.

“His downside is he receives one-third of the Mets for a three-year, $200 million loan,” Ganis said. “His upside is he would be the control owner of the Mets in three years at a reasonable valuation and only have to buy 60 percent, not 100 percent, to achieve that.”

Einhorn is president and co-founder of Greenlight Capital, a hedge fund that manages about $8 billion. His willingness to invest $200 million in a distressed team and maintain a path to majority ownership echoes a strategy he has used in amassing his fortune. He is known for buying into severely undervalued assets that have the potential to recover.

Few teams publicize the sale of minority stakes; even fewer publicize them before the sales have been made final. Yet the Mets announced their intention to sell 20 to 25 percent of the club four months ago. Since then, the team has slumped in the standings, sustained a rash of injuries and experienced a 10 percent decline in attendance from last year.

Wilpon was roundly criticized last week for making negative comments about his star players and for calling his team “lousy” and “snakebitten.” He also said his team was “bleeding cash.”

The announcement that the Mets were in exclusive negotiations appears to have given the upper hand to Einhorn, because it deterred other potential investors and set up an expectation that a sale would be made.

Still, Wilpon, who made his fortune in real estate, may be calculating that the team and the economy may recover in three years, which would make it easier for him to raise the cash needed to fend off a takeover of the club. At that time, Wilpon could sell part of his stake in SNY to Einhorn, or raise cash to repay him.

In the short term, the $200 million from Einhorn is almost certain to meet the team’s most pressing needs and potentially stabilize its finances into next year. The Mets are expected to use half the money to pay back loans to banks and Major League Baseball, according to several people with direct knowledge of the team’s finances. The rest would help pay player salaries and cover other expenses.

Article source: http://feeds.nytimes.com/click.phdo?i=604347e77ec460d8f91977146f92358b

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Hedge Fund Manager Negotiating Minority Stake in Mets

May 26, 2011 by Leave a Comment

The Mets have settled on selling Einhorn less than 49 percent of the team for $200 million; Einhorn would not receive a portion of SNY, the team’s profitable cable network. The sale is subject to approval by Bud Selig, the commissioner of baseball, and the Mets said they expected a definitive agreement by late June.

In a conference call Thursday, Einhorn would not criticize the stewardship of the team by Fred Wilpon, the principal owner; did not offer any details of his investment; and said he was not looking for a short-term payoff from the Mets. “I expect to hold it for a very, very long time,” he said.

He said that acquiring a piece of SNY never became an issue, as it did for other bidders, who wanted profits from the channel to offset losses on the team, which could be as much as $70 million in 2011. He said, “I’m not really interested in owning a TV channel.”

Einhorn, 42, the president of Greenlight Capital, moved with his family from Demarest, N.J., to Milwaukee when he was 7. As a child, he once masqueraded as the former Met Dave Kingman at Halloween; in Milwaukee he played softball in his best friend’s backyard, which was next door to Selig’s home.

“If we hit the ball really hard, it landed in the Seligs’ yard,” he said.

By announcing a tentative deal with an investor willing to take a noncontrolling stake in the team, the Mets have changed the topic of conversation after weeks of grim news and controversy. But several sports bankers said that by identifying a single investor, the Mets have scared away other bidders and given Einhorn leverage to demand a better deal. If the talks fall through, the Mets could be embarrassed.

“Rule No. 1 is you never have a press conference unless you have a deal signed,” said a banker who spoke on condition of anonymity because he did not want to affect the business he does with the team. “Now Einhorn owns them because they have to do the deal.”

In the conference call, Einhorn’s language underscored that the agreement with the Mets was not done. And while he emphasized his comfort with the terms of the deal, he never said what the Mets expect from it. But the Mets clearly need the financial boost from his money, after exhausting their $75 million credit line with Major League Baseball and getting a $25 million loan from baseball in November. Half of Einhorn’s investment will finance operations and losses; the rest will repay the M.L.B. loan and bank debt.

In a statement released by the team, Wilpon said: “ We are very excited about David joining our ownership group for several reasons. David’s investment immediately improves the franchise’s financial position. Equally important, David’s intelligence, integrity and success in both business and civic affairs provides us with another perspective in evaluating what is best for this organization and our fans, and we welcome his input.”

Einhorn emerged from a group of prospective buyers Wednesday.

The team lost $51 million last season and has hundreds of millions of dollars in debt. As such, a number of interested parties looked at the Mets’ books and went no further.

“They have to do something,” the banker said. “Their attendance is way off, and they are going to run out of cash.”

Many hurdles remain in any potential sale. Einhorn is likely to want indemnity from any legal settlements involving the court-appointed trustee representing the victims of the Bernard L. Madoff fraud. Given the Mets’ financial woes, he may also want protection from future capital calls that owners are often requested to pay when there are shortfalls.

Then there is the money. If the stake is $200 million, it may take time for Einhorn to organize the financing.

“The problem is, it’s a big check to write,” said Rob Tilliss of Inner Circle Sports, a sports financial advisory firm. “The money and the governance, those are the two inhibitors.”

David Waldstein, Ken Belson and Michael S. Schmidt contributed reporting.

Article source: http://feeds.nytimes.com/click.phdo?i=daf8a49dbbb22831e87481771d9eb1d4

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