March 3--The private equity firm slated to be the next operator of the H.J. Heinz Co. is no stranger to shaking up historic U.S. companies founded by industrious families that built powerhouse brands.
In late 2008, the co-founders of 3G Capital engineered the $52 billion takeover of Anheuser-Busch, whose Budweiser means as much to beer drinkers and St. Louis as Heinz means to ketchup lovers and Pittsburgh.
The acquisition of the King of Beers spawned big changes in St. Louis, where thousands collected a paycheck from Anheuser-Busch, where suppliers thrived on the brewer's growth and where charities benefited from the company's generous -- and often times extravagant -- spending.
Four years later, the beer maker employs fewer people in St. Louis, takes longer to pay its suppliers and donates less to charity. The changes have made Anheuser-Busch InBev a financial success, but they could leave Heinz employees and Pittsburgh uneasy about what lies ahead.
"InBev is an efficiency, supply-chain logistics expert," said Bump Williams, a Connecticut-based beverage industry consultant. "If there's any way to reduce costs, they're going to do it.
"They know how to make a [profit-and-loss] statement sing."
That is reflected in the $2.25 billion in cost cuts and efficiencies AB InBev has realized since taking over. The new owners immediately reduced the brewer's salaried work force by 1,400, or 6 percent. About 75 percent of the jobs eliminated were in the St. Louis region. The layoffs were in addition to the early retirement incentives taken by more than 1,000 salaried workers.
Those cost reductions were more than five times greater than the cuts that former management, headed by August Busch IV, was pursuing prior to selling the company
"These guys are world-class, tough, tough, tough cost cutters," said William Finnie, an Anheuser-Busch executive for 26 years.
"They focus on cash flow and they will make it happen," said Mr. Finnie, who left the company in 1991 and is now a business strategy consultant in St. Louis. "They will significantly increase the cash flow from Heinz. They know how to do that."
3G Capital is teaming with Warren Buffett's Berkshire Hathaway to acquire Heinz for $28 billion. The price tag includes $5 billion in Heinz debt that the new owners will assume. Mr. Buffett is primarily the banker, while 3G Capital will manage the joint venture.
The New York private equity firm's Brazilian co-founders -- Jorge Lemann, Carlos Sicupira and Marcel Telles -- got their start in the beer business in 1989 when they acquired Brazil's second-largest brewer. A string of acquisitions followed, capped by a 2005 merger with Belgium's Interbrew to form InBev, the world's largest brewer.
Alex Behring, 3G Capital's point man for Heinz, did not disclose his plans at the Feb. 14 press conference announcing the deal. "This is a company that's doing extremely well as it is," he told reporters.
Many observers expect he will take the same sharp knife approach 3G Capital is known for. How that plays out at Heinz may be different than it did at Anheuser-Busch, given the significant differences between the two deals.
Unlike Anheuser-Busch, which had extensive production facilities in St. Louis, Heinz has none in Pittsburgh. Its 1,200 employees in the region work at the company's global and North American headquarters as well as a research center in Marshall.
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