A closer look at 3G Capital, the firm behind the Tim Hortons deal
Marlene Leung, CTVNews.ca
Published Wednesday, August 27, 2014 9:06AM EDT
News of the $12.5-billion Burger King takeover of Tim Hortons has cast a spotlight on 3G Capital, the investment firm known for tightening and cost cutting that will own approximately 51 per cent of the new company.
Here's a brief overview of the global investment company.
3G Capital is a multi-billion dollar investment firm founded in 2004 by a group of Harvard-educated principals, some who hail from Brazil. The firm currently has offices in Rio de Janeiro and New York City.
In 2013, the firm partnered with Warren Buffett's Berkshire Hathaway to acquire the H.J. Heinz Company. In 2010, 3G Capital acquired Burger King, and currently has about a 70 per cent stake in the fast food giant.
Tuesday's Burger King-Tim Hortons deal was financed in part with $3 billion in funding from Berkshire Hathaway.
Prof. Alan Middleton from York University's Schulich School of Business said 3G's partnership with Buffett may be a sign to shareholders that it has "patience" and is looking to build the newly merged company.
"The typical response by a lot of venture capital organizations and their reputation is that they want in, they want to clean out, and they want to get out," Middleton, a marketing professor, told CTV's Canada AM.
3G can reassure investors that they’re handling this merger differently by having Buffett -- who has a reputation for patience and business building -- as a partner in the deal, Middleton added.
Reputation for "cleaning out"
Middleton said 3G has a reputation for "cleaning out" and "tightening," but will have to tread carefully when it comes to the beloved Canadian chain.
"The question is how much of that tightening is going to go on," he said. "There is a danger of cutting away what looks like excess but is an important part of the culture of Tim Hortons that created that bond it has with Canadians."
On Tuesday, Tim Hortons CEO Marc Caira told reporters that while the new company will be a "global powerhouse," the doughnut chain will not change.
"Tim Hortons will still be Tim Hortons. We will still be the company of the Timbit and of the Double Double," he said.
According to a joint statement, the deal will not change the Tim Hortons business model, and the company said there will be no changes to "restaurant-level employment."
3G can offer Tim Hortons the opportunity to expand the Canadian coffee shop into the U.S. and beyond, particularly through its relationship with Burger King, Middleton said.
Despite efforts to expand in the U.S., Tim Hortons has struggled to get a foothold stateside, and has had limited success in the Persian Gulf, he said.
Meanwhile, Burger King has representation in more than 90 countries.
"If you're looking at the Tim Hortons future business, they're almost at the saturation point in Canada," Middleton said. "So growth can really only come from that global network, and Burger King can help with that."