By Joe Leahy and Samantha Pearson
Some people learn negotiating skills at Harvard. Abilio dos Santos Diniz acquired his in a tiny cell with only two pin-holes in a wall for ventilation. Kidnapped in S?o Paulo by leftwing extremists in 1989, the man who is now Brazil?s richest retail magnate was kept in the stifling cubicle-sized space for a week with country music blasting in from a speaker before his release.
?He came back from the kidnapping a completely different person,? says Ana Maria Diniz, the billionaire?s eldest child. Certainly his career seems never to have looked back, culminating in his triggering this week what is set to be one of the biggest cross-continental boardroom showdowns in history, a battle that illustrates the shifting momentum of global business from the stagnant markets of the US and Europe to high-growth Brazil and its emerging peers.
The 74-year-old football lover with a permanent suntan, whose fortunes have tracked those of his booming nation, is a hero for the country?s emerging consumers. A fitness fanatic in a body-obsessed nation, he is fond of being photographed with his shirt off. He combines devout Catholicism and an iron work ethic with a flexible notion of fatherhood – he has six children from two marriages, aged from 49 to one.
What he did learn from his ordeal were patience and determination – which he displayed this week in a critical move in the long-running game of cat-and-mouse with his business partner, Paris-based retailer Groupe Casino, controlled by French magnate Jean-Charles Naouri.
Apparently unhappy with an agreement with Casino that required him to surrender control of Grupo P?o de A??car, Brazil?s biggest retailer and the company founded by his father, he arranged an alternative merger of P?o de A??car with the Brazilian arm of Casino?s sworn enemy, Carrefour. In a mark of his political connections, he persuaded the equity arm of Brazil?s powerful development bank, BNDESPar, to join the deal.
Casino was horrified at the prospect of losing control of its emerging markets flagship. Through its partnership with P?o de A??car?s chairman, the French group has enjoyed a pole position in one of the economic success stories of the past decade – the emergence from poverty of more than 30m Brazilians.
Mr Diniz?s father, a Portuguese immigrant, started P?o de A??car (literally sugarloaf) as a bakery in 1948, when Brazil was still largely an agricultural society. The young Abilio was chubby and was bullied at school, according to his autobiography, Paths and Choices, which reads like a self-help manual packed with prayers, healthy recipes and exercise routines complete with diagrams. ?I was short and fat. Yeah, exactly, those people who envy my 6 per cent body fat ratio today would be surprised,? he writes.
He graduated from university in S?o Paulo in 1959 and helped build the family business with his father into a multimillion-dollar chain. But in 1978, he fell out with the family and did a stint with the government during the next decade, as Brazil suffered inflation that contributed to the country?s infamous wealth gap.
The event that would change Mr Diniz for life occurred one Monday in 1989. Extremists seeking to raise money for guerrillas in El Salvador blocked his car on the way to work. The kidnapping coincided with Brazil?s first democratic presidential election, after more than two decades of dictatorship. He returned from the kidnapping a determined man. In a brutal succession battle, he pressured siblings to sell out of the firm. He downsized its network of stores, took it public and invited Casino to buy a stake in 1999. ?He was smart enough to know that competition was coming to Brazil through Carrefour, Walmart and others and he decided to prepare for it,? said a banker who has done business with him.
His timing could not have been better. First Brazil?s reformist president Fernando Henrique Cardoso introduced reforms to control inflation and stabilise the exchange rate. Then Luiz In?cio Lula da Silva, who won power in 2002, continued them. At the same time, Chinese demand for commodities picked up and the country boomed. Suddenly Brazilians had money, and Mr Diniz and Casino were waiting. Together they expanded the group into a network with 1,647 stores and revenue of R$36bn last year.
Even as he grew his business, Mr Diniz developed a reputation as something of a control freak. He set up a gym in P?o de A??car?s headquarters. Overweight executives were not welcome at the company. ?He really believes that an executive has to be well-rounded, mentally and physically, so he can be good at his job,? says Claudio Galeazzi, a former chief executive of P?o de A??car.
While Mr Diniz was admired by consumers, in business he developed a mixed reputation. Some of his acquisitions, such as that of discount retailer Casas Bahia, were characterised by boardroom friction, bankers say. ?He?s got a super ego,? said one person close to Casino. ?Probably the biggest ego in the Brazilian corporate world.?
As much as he represents the new Brazil, his spat with Casino will be a test of how far the country has come in terms of governance. Casino has accused him of reneging on a shareholder agreement that would give it control of P?o de A??car next year and has filed arbitration against him. The outcome will be closely watched at home and abroad.
The involvement of Brazil?s development bank is also attracting close scrutiny. Mr Diniz sits on a high-level advisory business board to Dilma Rousseff, the president. The government has supported the deal, saying the merger would create a national champion. Brazilian media question why the state is involved in a spat between private companies.
One group that will likely remain loyal will be the growing army of consumers. ?I?m being criticised a lot, but I believe that a merger between P?o de A??car and Carrefour would be good for the country and for Brazilians,? Mr Diniz tweeted this week, before quickly adding: ?I have faith in God.?
? The Financial Times Limited 2011