Julio Bozano, Rio's Peerless Bargain Hunter

How the tycoon has cashed in on free-market reform

He's a kind of Warren Buffett South. From elegant headquarters in downtown Rio de Janeiro, Julio Bozano presides over a sprawling empire, ranging from a leading investment bank to shopping malls and a coffee plantation about the size of Connecticut. The 60-year-old billionaire is chairman and chief shareholder of Companhia Bozano, Simonsen. While his conglomerate currently numbers 30 companies, Bozano is on a buying and selling spree, taking stakes in floundering companies and turning them around for sale at fat profits.

Among corporate bargain-hunters, Bozano has few peers. In the past five years, the soft-spoken, silver-haired executive has led groups that bought and, with stunning speed, revived a half-dozen state companies. This year, Bozano Simonsen, which has assets of more than $6 billion, cashed in its stakes in steelmakers Usiminas and Siderurgica de Tuberao and electric utility Escelsa for a combined capital gain of $428 million (table). It is on the verge of turning planemaker Embraer, which it bought with pension-fund partners in December, 1994, into a money-maker. And it is now weighing bids on other state-run businesses that Brazil plans to privatize, from railroads to mines.

But Bozano isn't much interested in what his companies produce and sell. "We just try to increase the value of our investments," he says, seated at a conference table surrounded by his collection of contemporary Brazilian paintings. "A company's attractiveness depends on its price, not its sector."

Bozano is an exemplar of a breed of aggressive Brazilian investors unleashed by President Fernando Henrique Cardoso's anti-inflationary Real Plan, which has forced restructuring in both the state and private sectors. Flush with cash from sales this year of long-held mining businesses as well as turnaround ventures, Bozano Simonsen could go for a piece of Brazil's biggest privatization prize: mining giant Vale do Rio Doce (CVRD), which the government plans to start selling off next year. When asked about CVRD, Bozano's weathered face lights up. Removing a Barclay cigarette from his lips and smiling broadly, he says: "We're interested in any privatization."

Bozano's recipe for success in such ventures is simple. Buy a company that generates plenty of cash but spends too much and is overstaffed. Install an executive with broad experience in the sector to apply the Bozano strategy. Trim every layer of personnel, tighten purchasing, and find out what your customers want. Then, when the biggest gains have been made, get out. Bozano Simonsen is comparable to such investment groups as Warren Buffett's in the U.S., says 42-year-old Paulo Ferraz, a Harvard University MBA who is CEO of the group's financial flagship, Banco Bozano, Simonsen. "I think Buffett is like us in that it doesn't matter if it's diamonds, retail, or Coca-Cola, as long as he's creating value," he says.

Bozano Simonsen's most radical makeover was at Tuberao, which it took over with partners in 1992. By the time Bozano Simonsen sold its 33% stake last April, it had reaped a 110% annual return on investment, including a $327 million capital gain, plus dividends. Although Bozano Simonsen usually doesn't take majority stakes, it insists on a major decision-making role in companies it buys into. In Usiminas, although it bought just 4.5% of the shares, Julio Bozano headed its board.

OLD SHIPMATES. The tycoon behind such lucrative turnarounds is an intensely private man who spends his spare time breeding horses in Argentina and Florida and adding to his art collection. He won't say how much he's worth, but maintains that media reports putting his fortune at $2.5 billion are inflated.

Bozano formed a financial-services company in 1961 with Mario Henrique Simonsen, who later became Finance Minister. They had met while taking compulsory navy training. Today, Bozano owns 91% of the group's voting shares, while Simonsen, who left management to Bozano, has about 5%.

Currently, Bozano Simonsen is overhauling Rio de Janeiro state bank Banerj in preparation for its sale on Dec. 17. Under a contract it won last December, Bozano is collecting a $36 million fee linked to its success in revamping Banerj plus a 5% cut of the auction price, set at a minimum $465 million.

After its experience with Banerj, Bozano Simonsen would be an obvious candidate to turn around other big losers such as Sao Paulo's state bank, which will likely have to be overhauled before it is put up on the auctioning block. But will Bozano Simonsen bid? You can almost count on it, if the price is right.

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