Abu Dhabi’s Mubadala Development Company will invest $2 billion in Eike Batista’s EBX Group Co. as the Brazilian billionaire seeks cash to fund expansion.
The government-owned fund will receive a 5.63 percent economic stake in Batista’s EBX holding company and an indirect interest in his publicly listed companies that include oil producer OGX Petroleo e Gas Participacoes and shipbuilder OSX Brasil SA (OSXB3), according to a statement sent by EBX yesterday.
Batista, the world’s 10th richest man, is raising money to develop his oil and mining business in Brazil and diversify from commodities. In January he agreed to sell a 10 percent stake in his MPX Energia SA (MPXE3) power venture to Germany’s EON AG for 850 million reais ($469 million) and also last month said he was in talks with wealth funds about selling part of his AUX gold unit.
The Mubadala deal “shows that there are more people interested and that there is international support for Eike’s businesses,” Leonardo Brito, an equity analyst at hedge fund Teorica Investimentos, said yesterday by telephone from Rio de Janeiro. “It may open the field for new partnerships.”
Mubadala is one of three wealth funds owned by Abu Dhabi and has stakes in companies from General Electric Co. (GE) to the Carlyle Group. Its assets were worth 169.7 billion dirhams ($46.2 billion) at the end of June last year, according to the company’s financial statements. Mubadala, which means “exchange” in Arabic, has interests in aerospace, industry, energy, health care, real estate and information technology.
Abu Dhabi, capital of the United Arab Emirates and home to about 7 percent of the world’s proven oil reserves, is trying to diversify away from oil by investing globally.
The transaction “marks our first significant direct investment into one of the fastest growing markets and is an important step in Mubadala’s development of strategic opportunities in Brazil and Latin America,” the fund’s Chief Executive Officer, Khaldoon Khalifa Al Mubarak, said.
Batista, 55, the son of a former Vale SA (VALE5) chief executive officer, became Brazil’s wealthiest man selling shares in a series of interlinking commodity start-ups. He’s pursuing ventures ranging from gold and iron ore to fertilizers and managing Ultimate Fighting Championship bouts.
The cash will “be used to reinforce the group’s already strong capital structure so as to help fund new enterprises across multiple business areas including recently announced partnerships by EBX,” the company said in the statement. The deal was structured through Batista’s Centennial Asset Brazilian Equity Fund and his other offshore holding companies, it said.
Batista’s main holdings are five publicly-traded companies including OGX, OSX, iron-ore producer MMX Mineracao & Metalicos (MMXM3) SA and MPX. He also controls LLX Logistica SA (LLXL3), constructing what the billionaire says will be the world’s third-largest port.
The accord with Mubadala won’t change the control, management or day-to-day activities of those businesses, EBX said. Batista uses the letter “X” in his company names because he says it symbolizes the multiplication of wealth.
OGX, Batista’s most valuable holding, dropped 2.4 percent to close at 15.83 reais in Sao Paulo. The stock has fallen 7.9 percent in the past three days, the worst three-day performance since Dec. 16. MMX rose 5 percent to 9.40 reais, its biggest gain since March 13. LLX added 0.8 percent, and MPX rose 1.4 percent.
The deal also gives Mubadala participation in Batista’s “pipeline of future investment opportunities” in non-commodity companies, according to the statement.
The stake purchase values EBX, the holding company for most of Batista’s assets, at $35.5 billion. Batista’s net worth rose 19 percent this year through last week to $26.8 billion, according to the Bloomberg Billionaires Index, making him Latin America’s second richest man after Carlos Slim.
OGX started to produce crude in January, seven months after its original target. The company, which posted a net loss of 482.2 million reais in 2011, is producing about 12,000 barrels a day, Chief Executive Officer Paulo Mendonca said March 23.
As his commodity and logistics companies leave the pre- operational phase, Batista is diversifying into segments such as sports and technology. EBX has entered the catering-services market through NRX-Newrest, a joint venture with Newrest Group Holding, and also started IMX, a partnership with IMG Worldwide Inc. focused on sports and arena management in Brazil.
Batista is also considering investing $2.5 billion in a plant to make electronic screens in Brazil through a joint venture with Foxconn Technology Group (2354), a maker of metal casings for Apple Inc., he said Feb. 15. In October, EBX signed an agreement with Egypt’s Orascom Construction Industries for a fertilizers venture that may require $3 billion of investment.
Batista is also considering “business opportunities” in the coffee market, EBX said Jan. 30, without providing details.
After telling Brazilian media he’d be the world’s richest man by 2013, the Rio de Janeiro-based billionaire told Bloomberg News earlier this month he would take first place by 2015, echoing similar comments last year.
Slim, the world’s richest person, has currently a fortune of $69.2 billion, according to the rankings. Batista’s five publicly-traded companies, where he has controlling stakes ranging from about 42 percent to 78 percent, have a combined market value of about $39.2 billion.
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