Tuesday, January 6, 2015

Brazil's 3G Capital Still Has More Appetite for Deals

From a recent blog post after the Heinz deal,
"We've written in this blog about Buffett's long relationship with Brazilian-led 3G Capital Partners which was behind its stepping up to help finance the purchase of Heinz, and about how that relationship would be a new model for Berkshire going forward, i.e. partnering with private equity to do bigger, better, and faster returning deals than BRK's working on its own.  Here is an example in this deal, and it sounds like it should work out well for the preferred holder, as that instrument has borne much fruit recently, as exemplified by the Goldman deal."
Now comes hunting season on the corporate savannah for new targets.  Campbell's Soup, as we've said before is a bad company that has confounded corporate makeover artists before: buying a bad company at a great price is not Warren Buffett's model.

Pepsi would be a very expensive deal, and it would have to feature the tired idea of spinning off the snack food business. The 3G model seems to focus on making operations better, including cutting costs.  Financial engineering doesn't seem to be in their wheel house.  As the Journal mentions, taking on part of the company might work, but this would take time, be complicated for Pepsi and wouldn't seem to offer the right size deal.

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