Guinness to Get Brazilian?
A rumour has circulated from the Brazilian magazine “Veja” that the country’s richest man is eyeing up a buyout attempt of Diageo, parent company to Baileys and Guinness. In one of those few moments when both a reporter in Rio de Janeiro and in Basin Lane can both report on the same story and both accurately describe it as “local news”, billionaire Jorge Paula Lemann (worth $26 billion) has turned his eye to the home of the black stuff.
Though at this stage the supposed take over is just a rumour, it certainly has been enough to cause a noticeable stir in the market. Diageo’s share price jumped by 8.7% on the New York Stock Exchange last Friday, its biggest jump in 6 and half years after a number of disappointing quarters for the company, which has reported a continual drop in profits. Mr Lemann will be operating with two other partners if he does decide to make a bid, Mr Carlos Alberto Sicupira and Mr Marcel Telles. The trio, all former investment bankers, already have large stake holdings in a number of conglomerates most noticeably Heinz, Kraft Foods and Burger King.
By adding Diageo to his already expansive portfolio, Jorge’s Swiss residence will surely become party central, as he already owns brewery giant Anheuser Busch, the parent company of Budweiser, Sol, Becks, Brahma and Hoegarden. The brewery controls the American market and a healthy chunk of the South American one too but with a $46 billion price tag, one would expect some level of bragging rights. Diageo itself, is the world’s largest distiller (Smirnoff and Jim Beam also reside within the firm), all they need now is to pick up Coca Cola for the mixers.
So what do we know about Mr Lemann? A Brazilian born with Swiss ancestry, this Harvard graduate is a five time Brazilian National Tennis champion, who even has competed at Wimbledon. Though born to wealth (his father owned a substantial diary manufacturer), he is known for his no nonsense business style. A famous story attributed to the man relates about an attempted kidnapping of his three children, resulting in his heroic driver taking a bullet to save them. Unfazed, Jorge insured the children went to school that day and attended his own meetings, with one colleague only noting that he was a few minutes late. I tend towards a week off if I get a sniffle myself.
His share holding company, InBev, which owns Anheuser Busch was remarked upon for how it “ruthlessly pursued a cost efficiency agenda” when it took over the beer giant (The Gaurdian, 2008). Seemingly this would be the reason why the company is the biggest brewer in the world in terms of revenue despite not being the largest by volume. This I’m sure will be good news for Diageo’s shareholders, but personally speaking, the phrase “cost efficiency agenda” carries a 1980s movie bad guy chill to it.
Of course, this situation will be watched by a number of local people with great interest. Guinness is still a major local employer, something it capitalised on in a recent advertising campaign. It must be remembered that in times past, the local workforce had to galvanise in an effort to fight Diageo’s planned relocation of the St James Gate to Meath. Any change of ownership will be seen as a challenge to the status quo, particularly, with someone with Mr Lemann’s tough guy reputation and commercial bona fides. That said considering that the Storehouse is Ireland’s number one tourist destination it may be too soon to get ahead of ourselves.
