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Safra bank acquires The Gherkin and shows Brazilians’ growing appetite for M&A

Safra bank acquires The Gherkin and shows Brazilians’ growing appetite for M&A

Posted by Laura Zúñiga on November 11, 2014

Most people in Brazil have no idea what the Gherkin is. Although the iconic London skyscraper has long been compared to a giant pickled cucumber by everyone in the UK, it is generally referred to by well-travelled Brazilians as “the revolver-bullet building”.

Nevertheless, many could barely contain their delight on social media after it emerged that a fellow Brazilian had snapped up the City of London’s second-tallest and most recognisable building.

On Monday, Joseph Safra, Brazil’s richest banker, confirmed that he had won the bidding war to acquire the Norman Foster-designed Gherkin, officially known 30 St Mary Axe. At a price of £726m, the deal ranks as one of Brazil’s 20 largest overseas acquisitions of all time.

“And people still say the economy here is in a bad state, screw them!” tweeted one defiant young Brazilian.

However, for all the national pride expressed, Brazil’s economy is still in a bad state. The country slipped into recession in the first half of this year and is expected to grow just 0.2 per cent in 2014. Not only have the ruling PT party’s interventionist policies scared away investors, but the World Cup and presidential elections have also put a brake on economic activity.

For Mr Safra, though – one of Brazil’s few truly global investors – the economic scenario back home is far from a hindrance. If anything, it is simply another reason for his group to speed up its diversification abroad.

Only two weeks before the Gherkin’s acquisition, the Safra Group sealed a joint deal with the Brazilian Cutrale family to buy the US banana company Chiquita for $1.3bn – the biggest US purchase by a company from the Latin American country in four years. People close to the Safras say the quick succession in which the deals were announced was merely a coincidence – adding that they do not represent any change in strategy.

Even so, the fact that the Gherkin and the Chiquita deals are two of the biggest for Brazilian companies this year indicates a new phase of dealmaking in the country, analysts claim, and one that suggests the heady days of the commodity supercycle is at an end.

Only two years ago, Brazil’s richest man was Eike Batista – a brash tycoon who made and lost his fortunes on risky oil and mining start-ups in Rio de Janeiro. Nowadays, the title belongs to Jorge Paulo Lemann who, like Mr Safra, is known for investing in well-established names often outside Brazil.

In 2008, Mr Lemann orchestrated the $52bn takeover of Anheuser-Busch by Belgian-Brazilian brewer InBev – which also helped to propel fellow dealmakers Marcel Herrmann Telles and Carlos Alberto Sicupira into Forbes’ list of the four richest Brazilians.

All three are partners in the private equity firm 3G, which has made a series of high-profile acquisitions this decade.

In 2010, Mr Lemann and his partners bought Burger King for $3.25bn. Two months ago, they used the fast-food business to launch a $11.4bn takeover of Canada’s baked goods market leader, Tim Horton. A year before that, 3G made its most headline grabbing deal to date: teaming up with Warren Buffett’s Berkshire Hathaway to buy Heinz for $23bn.

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