Beyond the Americanas (AMER3): Lemann’s companies and 3G partners have a history of accounting problems

The consequences of the disclosure of a 20 billion reais hole in the company’s balance sheet American (AMER3) led some of the retailer’s creditors to attribute unflattering practices to those who, until then, were considered a reference in Brazilian capitalism: businessmen Jorge Paulo Lemann, Marcel Telles and Carlos Alberto Sicupira.

BTG Pactual, for example, accuses Americanas’ trio of key investors of benefiting from years of what it calls accounting fraud at the firm.

Brazil’s three richest men have made their fortunes with a management style based on aggressive cost-cutting and growth through acquisitions of investee companies.

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Lemann’s phrase “dreaming big requires the same work as dreaming small” has since become something of a mantra of good business management. But that image was scratched after the billion dollar hole in the retailer was revealed.

Americanas was one of the first forays by billionaires into the “big dream.” They bought control of Americanas 40 years ago and only left that position in 2021, after a corporate restructuring that reduced the stake from 53.3% to 29.2%.

For all these reasons, the attitude of entrepreneurs in the days following the accounting scandal left creditors indignant. Among the representatives of the banks to which Americanas owes, there was a feeling that Lemann, Telles and Sicupira wanted to socialize the loss.

Among the managers of the financial market – some of them, American investors -, many share the same opinion and go further: not only do they consider it almost impossible that the trio knew nothing, but they also comment that other people closely involved let it all happen , with the intention of not messing with important people in the market.

It is worth noting that everything is more opinions and impressions than hard facts, at least for now. But the Americanas crisis ended up drawing attention to other member-owned companies that either fared poorly or also had a history of accounting problems.

SEE ALSO – Is this the end of Americanas? A scandal that revealed a R$20 billion deficit could be just the beginning; understand in the video

Bankruptcy of the Guarantee Bank

In 1998, Lemann, Telles and Sicupira were forced to sell Banco Garantia to Credit Suisse First Boston.

The investment bank’s high exposure to foreign debt brought it to the brink of insolvency during the crises in Asia and Russia between 1997 and 1998. It was therefore not an accounting problem, but a strategic mistake.

Garantia never went bankrupt, but the trio never again invested heavily in the financial sector.

The republication of the financial statements of ALL

In 2015, months after the troubled acquisition of América Latina Logística (ALL) — which later gave rise to Rumo (RAIL3) — Cosan (CSAN3) was forced to re-release the company’s 2013 and 2014 financial statements.

The intention was to repair the accounting inconsistencies found in several lines of the financial statements which ultimately inflated the company’s Ebitda (earnings before interest, taxes, depreciation).

Born from the acquisition of the State Railways, ALL has dazzled the market precisely for its rapid growth and for a management considered well done. But it was also the target of an executive stampede and numerous complaints from clients, who then had yet another cause for concern when accounting inconsistencies made the news.

The fine paid to the SEC by Kraft Heinz

In 2013, 3G Capital invested $ 28 billion in the acquisition of the giant Kraft Heinz, which two years later received none other than Warren Buffett as one of its partners. Thus was born The Kraft Heinz Company, one of the largest food companies in the world.

But what appeared to have everything to fix without further setbacks also raised alarm in the market in 2019, when the Securities and Exchange Commission (SEC) – regulator of the capital markets in the United States – accused the company of accounting errors .

In this case the allegations particularly involved the company’s purchasing department, accused of maintaining false contracts with suppliers and of disguising the cost it had with them. As happened with ALL, the result was an inflated and mismatched EBITDA, which forced the company to re-release its financial statements with the necessary corrections and a write-off of US$ 15.4 billion.

In 2021, a $62 million settlement was reached between Kraft Heinz and the SEC. Since then, the trio have reduced their stake in the company by selling shares.

During the tumultuous conference call with the market held on Thursday (12), Sérgio Rial himself recalled a bit the history of 3G Capital to defend the executives while trying to explain the Americanas case.

“The more negative voices will say, ah, that wasn’t good at all, or ‘wasn’t there a problem at Heinz?’ But this group never stopped reporting problems when they found them, they are full-blooded capitalists, who I am very proud to have been associated with,” she said.

Can Ambev (ABEV3) be affected?

In the face of the whole scandal involving Americanas (AMER3), Ambev (ABEV3) has also been tainted and is already down 4.54% this month – considering the close date of Tuesday (17).

In this case the great fear of the market is that the trio formed by Telles, Lemann and Sicupira – which also controls the brewer – will be forced to sell part of its shares to contain the damage done in Americanas.

With this, some banks and analyst firms should revise their recommendation for the asset, remembering that the momentum of the company is not the best, and the case of Americanas has only worsened the scenario.

Another comment that is also circulating on the market is linked to the generalized distrust that has hit investors.

Eyes on the Americans (AMER3)

The deficit of 20 billion reais to Americanas, therefore, seems to be the new episode in a series of problems that the trio has already faced on other occasions. But the case of the retailer tends to be one that will go down in Brazilian capital market history.

So far, there are more questions than answers, including what a possible judicial recovery of the company would look like and what amount is required for Americanas to be capitalized, if any.

And when it comes to values, the market mood sours forever. The company yesterday defaulted on paying interest on a bond issue following a court decision that suspended its charges for 30 days.

This takes place to protect the Americans from possible blockages or seizures of assets and to postpone the payment of debts, which, according to the request made to the Justice of Rio de Janeiro, reach R$ 40 billion.

In an effort to avoid a billion-dollar default, BTG Pactual has also been fighting a legal battle since the breach was announced last Wednesday (11), but the bank’s claims have so far been rejected by the courts.

Bank of America and BV join the list of banks seeking legal protection.

A Citi report reveals that the banks most exposed to retailer debt are BTG, Bradesco and Santander Brasil.

Citi calculates that BTG’s exposure to Americanas is R$1.9 billion, or 1.5% of the loans in the portfolio. Bradesco already has 0.5% of its loans committed to the retailer, totaling R$4.7 billion. Finally, Santander has 3.7 billion reais, which represents 0.6% of the loan portfolio.

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