In Latin America's harsh new competitive climate, deep pockets and old family ties don't seem to cut it anymore. Nowhere is that message coming across more clearly than at the continent's biggest conglomerate, Sao Paulo-based Bunge & Born. Controlled by three shareholding families, the secretive, globe-trotting company has sales of $14 billion, from food to computers. But recession and rising competition at home have dunked key operations in red ink and exposed glaring gaps in the group's loose, overlapping management.
The startling result: a palace coup. A group of family insiders, led by Octavio Caraballo, who oversees Bunge & Born's $1.5 billion Argentine businesses, has taken charge. Caraballo is from the Hirsch family, which inherited shares from an early partner in the business. Now he heads Bunge & Born's key family-run steering committee, replacing ousted Jorge Born III, 57.
FAILED FORAY. In mid-May, after months of stonewalling, the company confirmed rumors of the boardroom revolt, which actually happened last year. And in a first-ever report on consolidated Brazilian operations, it revealed the coup's bottom-line motive: losses in Brazil totaling $61 million in 1990 and $93 million in 1991. Dissension among family shareholders was also stirred by Jorge Born's failed 1989 foray into Argentina's public affairs. Born collaborated with newly elected President Carlos Menem to pick two successive Bunge & Born executives as economy minister. But one died six days into the job, and the second was forced out by a surge of hyperinflation.
Caraballo, 48, aims to modernize and restructure, starting with the collection of Bunge & Born companies in Brazil and Argentina, where the group was founded in 1884. To map changes, he brought in consultants McKinsey & Co.
Caraballo clearly wants more professional management, free of family rivalries. Jorge Born has been moved to the post of honorary president, while an outsider is replacing younger brother Juan C. Born, 56, as country manager, or overseer, of the group's 75 Brazilian businesses. His expected successor: Ludwig Schmitt Raden, former president of the Brazilian subsidiary of Germany's Degussa. The objective is to bring in someone "with a fresh mind, open to solving problems, distant from any internal dispute," says group spokesman Armando Coelho Borges Filho.
The group's main troubles stem from its awkward structure. Although Bunge & Born is a major player from Australia to the U.S. to Europe, it doesn't have the typical multinational's neat pyramid of subsidiaries controlled by a parent company. Instead, family shareholders hold stock in each of many affiliates, with a steering committee loosely in charge.
To sort out the management tangle, 20 young Bunge & Born executives trained by McKinsey have been visiting Brazilian affiliates to explore ideas for change. Expansion hasn't halted, however: Last month, the group's Moinho Fluminense bought Hershey Foods Corp.'s 41% share of Brazilian foods processor Petybon for $7.5 million. And Borges Filho says Brazilian operations will show a profit for the year, helped by a record harvest and heavy food exports.
In Argentina, critics say Bunge & Born has missed good buys in Menem's privatization spree. But now, to tap the expanding local capital market, three affiliates are planning to sell stock to the public for the first time. Three others are already publicly traded. The moves will help Bunge & Born to "keep growing and grasp opportunities," says Martin Blaquier, the group's capital markets director. Caraballo will need those fresh funds and then some if he's to reshape Bunge & Born to meet the tough new competition on its home ground.