The potential union of fast-food giants Tim Hortons Inc. and Burger King Worldwide Inc. is being instigated by a Brazilian private equity firm with a taste for household-name food companies.
3G Capital Inc. is the majority owner of Burger King, with a more than 70 per cent stake in the Miami-based burger chain whose market cap is about $11.4-billion (U.S.). The investment firm, founded a decade ago by five wealthy co-founders from Brazil, has established a reputation for cost-cutting.
After 3G led a $4-billion acquisition of Burger King in 2010, the new owners installed a team that proceeded to revamp the menu, sell a number of its restaurants to franchisees and lay off head office staff.
The company is still focused on finding ways to use its resources better. "It is something that's embedded in our culture is that we are going to continuously look for areas to find efficiencies and to operate our business in a smarter way," said Josh Kobza, Burger King's chief financial officer, discussing costs on a recent earnings call with analysts. "That's another area that will continue to be focused on over the next few years, in trying to be the most efficient operator in our sector. And that is really how we think about driving underlying growth in our business and those are the big focuses for our model going forward."
Others in the private equity business consider 3G to be a top notch operator that is cost and capital efficient. One fan is famed investor Warren Buffett. In February last year 3G joined an investment consortium led by Mr. Buffett's company, Berkshire Hathaway Inc., to buy ketchup maker H.J. Heinz Co. in a $28-billion deal.
The deal and subsequent leadership changes ruffled a few feathers. Heinz sells 650 million bottles of its best-known condiment each year, but none of that red sauce is offered at McDonald's Corp. any longer. Following the appointment of former Burger King CEO Bernardo Hees to the top job at Heinz, McDonald's said as a result of "recent management changes" it wouldn't stock Heinz products. Mr. Hees has also been a partner at 3G since July 2010.
3G prides itself on recruiting and grooming its own "top-tier talent" and has also instated new leadership at Burger King. BK's current chief executive officer Daniel Schwartz cut his teeth at 3G, having joined as an analyst in 2005. He worked with the firm's public and private equity investments for five years, becoming a partner in 2008. After 3G acquired BK in 2010, Mr. Schwartz took on the role of CFO, and later became leader of the burger chain in June 2013. Other Burger King executives also have ties to 3G, or its related companies.