U.S. stocks are essentially flat early on Tuesday afternoon, with the Dow Jones Industrial Average (DJINDICES:^DJI) and the S&P 500 (SNPINDEX:^GSPC) up 0.05% and down 0.04%, respectively, at 12:30 p.m. EDT.
"I like big deals, but they [3G Capital] really like big deals."
Even Berkshire Hathaway CEO Warren Buffett paid homage to the exceptional drive of Brazilian investment company 3G Capital at Berkshire's Annual Meeting in May. With this morning's announcement by U.K.-listed brewer SABMiller plc that it has agreed to be acquired by Anheuser-Busch InBev, 3G Capital is now behind two of the biggest deals of the year: the creation of Kraft Heinz (in partnership with Berkshire) and the mooted proposal to form the world's largest brewer.
AB InBev's final all-cash offer is worth 44.00 pounds per share (there is also a cash-and-share offer for 41% of the shares) and values SABMiller at 67.9 billion pounds ($103.6 billion) on an equity basis and 75.7 billion pounds ($115.4 billion), inclusive of net debt. If completed, it would be the biggest deal in the food and beverage sector ever, and within the top five across all sectors.
The deal is the culmination of a business success story that defies the imagination, an odyssey that began in 1989, when three of 3G Capital's founding partners, Jorge Lemann, Carlos Sicupira and Marcel Telles, bought a 20% economic interest in Brahma, then Brazil's second-largest brewer. Crucially, they also became the controlling shareholders, with a voting interest of 51%.
Through relentless drive, a ruthless focus on costs, and -- naturally -- acquisitions, that $51 million investment has mushroomed into a 23% stake in AB InBev, worth roughly $42 billion at today's share price. That works out to an annualized return of approximately 29% over more than a quarter of a century. It's one of the most spectacular feats of wealth creation in the history of business. It's little wonder Jorge Paulo Lemann has become the wealthiest man in Brazil.
"Dream big" is 3G Capital's motto. Clearly, that's no empty corporate slogan; it's an imperative encoded in the company's DNA.