Classic Deal - Burger King by 3G Capital (EP.384)

Capital Allocators – Inside the Institutional Investment Industry

Ted Seides – Allocator and Asset Management Expert

Investing, Capitalallocation, Business

4.8 • 806 Ratings

🗓️ 6 May 2024

⏱️ 73 minutes

🔗️ Recording | iTunes | RSS

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Summary

3G Capital’s buyout of Burger King may be the most successful private equity deal you’ve never heard about. Over the last fourteen years, or the length of a typical private equity fund, 3G turned a $1 billion investment into $28 billion in value. The annual dividends from the investment accruing to 3G today are around 70% of its invested capital. The deal is one of the highest earning buyouts ever.

3G is an organization with a storied history. Founded by Jorge Paolo Lemann, Carlos Alberto Sicupira, and Marcel Herrmann Telles, the group created an owner-operator model of investing. They rose to prominence through building the largest beer company in the world, initially buying local brewer Brahma in 1989, expanding it and merging with a competitor to become AmBev in 1999, merging with Interbrew to become ImBev in 2004, and taking over Anheuser Busch in 2008 to become AB InBev.

Twenty years ago, Alex Behring, a young star on their team, moved to the US to form 3G Capital and take the approach abroad.
Burger King was the second largest hamburger fast food chain after McDonalds in 2010 when 3G took it private. What it accomplished since then has been extraordinary.

My guests to discuss 3G and the deal are Alex Behring and Daniel Schwartz. Co-Managing Partners of 3G Capital.

Our conversation covers the history of 3G, Alex's journey to form 3G Capital, and the 3G playbook. We then dive into the deal, covering the sourcing and deal dynamics, improving operations, growing the business, taking the company public unexpectedly, and reloading to buy Tim Horton’s, Popeye’s, and Firehouse Subs. Today’s Burger King is part of Restaurant Brands International (QSR), a public company with a $32 billion market cap and $50 billion enterprise value.

This classic deal will widen your aperture on what’s possible with a long-term, compounding holding period and operational excellence.

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Transcript

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0:00.0	Capital Allocators is brought to you by Carda for Private Equity, the ultimate software
0:07.3	solution for your firm, portfolio companies, and investors. With products spanning fund
0:13.3	administration, cap table management, and custom waterfall modeling, Carter provides an
0:18.9	end-to-end solution that helps you realize the full potential
0:22.1	of your investments.
0:23.7	I have seven investments that work with Carter, and as an investor, I find it secure,
0:29.2	easily accessible, and easy to use for direct and fund investments alike.
0:34.8	Empower your team with real-time data and powerful automation tools that unlocks additional
0:40.1	value for you and your investors with CARDA. Go to carda.com slash allocators to learn more.
0:53.8	Hello, I'm Ted Sides, and this is Capital Allocators.
0:59.3	This show is an open exploration of the people and process behind capital allocation.
1:05.3	Through conversations with leaders in the money game, we learn how these holders of the
1:10.2	keys to the kingdom allocate
1:12.1	their time and their capital. You can join our mailing list and access premium content
1:17.5	at capital allocators.com. All opinions expressed by TED and podcast guests are solely their
1:24.6	own opinions and do not reflect the opinion of capital allocators or their firms. This podcast is for informational purposes only and should not be relied upon
1:31.6	as a basis for investment decisions. Clients of capital allocators or podcast guests may
1:36.3	maintain positions and securities discussed on this podcast. 3G Capital's buyout of Burger King
1:43.0	may be the most successful private equity deal you've never heard about.
1:48.2	Over the last 14 years, or the length of a typical private equity fund, 3G turned a $1 billion
1:54.6	investment into $28 billion in value. The annual dividends from the investment accruing to 3G today are
2:03.0	around 70% of its invested capital. The deal is one of the highest earning buyouts ever.
	...

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