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Lemann's fight to save Americanas from $5 billion fraud


fight to save Americanas from $5 billion fraud, financial news

Jorge Paulo Lemann, a Brazilian billionaire known for his prowess in deal-making, is currently focusing on the rescue of Americanas SA, a retail company facing bankruptcy due to a significant fraud scandal. Lemann, together with his long-time business partners Marcel Telles and Carlos Sicupira, has been a major shareholder in Americanas since the early 1980s. The crisis hit when their collective stake was about 30% of the company. This situation is particularly notable as it involves a large-scale effort to save a major company from the repercussions of a $5 billion fraud as reported by Bloomberg.


Lemann and his partners have been invested in Americanas for several decades, overseeing its growth and development. However, the revelation of the massive fraud scandal has placed the company in a precarious position, necessitating a robust response. The trio's commitment to the company is evident as they navigate through this crisis, involving debt restructuring and recapitalization efforts. Their proposed solution would result in them owning approximately half of the business, demonstrating their willingness to increase their stake to save the company.



Discussing the crisis at Americanas, Lemann referred to the retailer as the first company they acquired, highlighting its significance in their portfolio. Americanas, known for offering products at bargain prices, has a widespread presence with stores across the nation. The crisis's impact extends beyond financial loss, affecting the livelihoods of the company's 30,000 employees. Lemann’s statement underscores the urgency and responsibility he feels to rectify the situation, not just as a business challenge but as a moral obligation to the employees.


The scandal at Americanas involved deceptive practices by the previous management team, led by Miguel Gutierrez. The accusation is that they manipulated the company's financials, including hiding certain accounts related to marketing contracts and supply-chain financing. This misconduct was designed to artificially inflate the company’s financial results. The scandal not only threatened the stability of Americanas but also tainted Lemann’s otherwise illustrious investing career. For Lemann, whose fortune is estimated at around $23 billion, the situation represents more than a financial loss; it's a dent in his reputation.



Lemann and his fellow shareholders are committed to resolving the situation at Americanas, with plans to inject significant capital into the company. This 12 billion reais investment (equivalent to about $2.4 billion) is intended to stabilize and revitalize Americanas. Additionally, they have pledged not to sell their shares for at least three years, demonstrating a long-term commitment to the company's recovery. This move is critical to restoring investor confidence and providing the company with a stable financial foundation.


Lemann has been relatively silent on the Americanas fraud, with his latest public remarks marking a rare exception. He typically maintains a low profile, making his recent comments noteworthy. Lemann's partner, Sicupira, has been more actively involved in Americanas, currently serving on its board. This situation indicates a division of roles among the partners, with Sicupira taking a more direct role in managing the crisis.



At 84 years old, Jorge Paulo Lemann is a well-established figure in the world of business, most famous for co-founding 3G Capital. His achievements include the creation of a brewing empire that culminated in the takeover of Anheuser-Busch, forming AB InBev SA – the largest beer manufacturer globally. His career is marked by strategic acquisitions and effective management, contributing to his reputation as a savvy business magnate.


Lemann's investment portfolio is diverse, including significant stakes in the fast-food industry. Through 3G Capital, he acquired Burger King and integrated it into Restaurant Brands International Inc., expanding his influence in the sector. Additionally, his partnership with Warren Buffett in purchasing Heinz and then Kraft, followed by their merger, exemplifies his strategic approach to business growth and consolidation in the food industry.



The Americanas scandal has severely impacted the company's market value, which has dramatically decreased from 10.5 billion reais to just 500 million reais. This decline reflects the gravity of the fraud's impact and the challenges that lie ahead in Lemann's efforts to restore the company's financial health and reputation.


Lemann’s comments during the Harvard Brazil Conference also touched on broader issues of trust and the complexities of business management. He highlighted the inherent risks in delegation, a strategy he has largely relied upon in his successful business career. Lemann’s insights reflect his vast experience and underscore the importance of careful management and oversight in business operations.


Beyond discussing business, Lemann shared personal anecdotes from his youth, including his time spent surfing and playing tennis in Rio de Janeiro. He also recounted his initial academic struggles at Harvard and his early business ventures. These reflections provide a more personal view of Lemann, showing the path that led him to become a successful businessman. His advice to students to seek real-life experience over immediate academic pursuits emphasizes the value he places on practical knowledge.



Lemann spoke about the ongoing process of transitioning leadership in his businesses. As he and his contemporaries age, there's a growing need to establish new governance structures that differ from the hands-on approach they used in the past. This transition phase involves preparing for the next generation of leaders to take over, ensuring the continuity and success of their businesses in the future.


Lemann's sons, Marc and Paulo Alberto, are already involved in various business endeavors, serving on several boards. This involvement is part of a broader strategy to ensure a smooth generational transition in the management of the family's business interests. Similarly, Telles has transferred his stake in AB InBev to his son, indicating a conscious effort among Lemann's circle to prepare their businesses for the future.



Jorge Paulo Lemann is known for his privacy and infrequent public appearances, making his recent comments at the Harvard Brazil Conference particularly significant. His insights into the Americanas situation and broader business philosophies provide valuable perspectives from one of the world's most successful investors. His last notable public conversation was with Brazilian businessman Abilio Diniz in 2022, another rare instance where Lemann shared his thoughts publicly. Diniz, who passed away at the age of 87 earlier this year, was another significant figure in Brazilian business.


07.04.2024



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