Bloomberg News

Brazil Families Richer Than Batista With Soaps and Cement

November 13, 2012

Eike Batista

Eike Batista, chief executive officer of EBX Group Co. Ltd., Brazil's richest man. Photographer: Jonathan Alcorn/Bloomberg

For decades, the Marinho and Moraes families have shaped Brazil’s culture and industry, quietly building up fortunes that exceed that of Eike Batista, the country’s headline-grabbing richest man.

Brothers Roberto Irineu, Joao Roberto and Jose Roberto Marinho control closely held Organizacoes Globo, Latin America’s largest media group, whose popular soap operas and nightly newscast help them control about half of Brazil’s television market. All together, the family commands a fortune of $20 billion, according to the Bloomberg Billionaires Index.

Moraes family patriarch Antonio Ermirio, two siblings and the heirs of his late brother own the Votorantim Participacoes SA conglomerate, Brazil’s largest maker of cement. They control a combined net worth of $24.5 billion, according to the index. Unlike Batista, worth $19.6 billion through his six publicly traded commodity startups, seven Marinho and Moraes billionaires have never appeared on an international wealth ranking.

“They’re richer than Eike, but certainly don’t have the same need to advertise it,” said Samy Dana, a professor of economics at Fundacao Getulio Vargas in Sao Paulo. “They’re discreet.”

Both Votorantim and Globo, now led by the third generation, thrived under dictators and democratically elected presidents alike, through boom years, recessions and hyperinflation. By 2006, when Batista sold shares in the first of his interlinking companies, the Marinho and Moraes families were already two of the world’s richest. With Brazil’s economy now one of the world’s seven largest, their fortunes have soared since then.

Approval, Disdain

The Bloomberg Billionaires Index valuation “can serve as a reference, but the calculations are conservative,” Votorantim said in an e-mailed statement Oct. 1. The Marinho family declined to comment on their net worth estimate.

Globo chief executive Roberto Irineu Marinho, 65, and his 59-year-old brother Joao Roberto, who is the company’s editorial chief, are each worth $6.5 billion based on their 32.3 percent stakes in the media empire. With 32 percent, Jose Roberto, the 56-year-old heir who leads the family’s philanthropy, controls a fortune of $6.4 billion. Seven of the three brothers’ sons own the rest of Globo.

Globo Comunicacao & Participacoes SA, the Marinhos’ Rio de Janeiro-based television network, claimed 53 percent of primetime viewership, according to the company in a March earnings report. When the finale of its latest telenovela hit, Avenida Brasil, aired last month, shouts of approval and disdain for the characters could be heard throughout Sao Paulo. The company has long set the cultural agenda: in 1968, Tropicalia musicians Caetano Veloso and Gilberto Gil, then just becoming famous, performed on Globo TV.

Debate Scandal

It’s also had political influence. In a section of Globo’s website labeled “errors,” the company says it didn’t give adequate coverage to popular protests calling for free presidential elections in 1984, caving to pressure by the military dictatorship that had taken power two decades earlier. Ultimately, it was Brazil’s congress that chose the country’s first non-military president since the 1960s.

When free elections were at last called in 1989, Globo created a scandal with its coverage of a debate between Fernando Collor, then the favorite, and Luiz Inacio Lula da Silva, the labor leader who would go on to win the presidency in 2002. The company said it edited the debate in a way that unfairly benefited Collor. Still, when Globo patriarch Roberto Marinho died in 2003, then-President Lula attended the funeral.

In 2012, the Marinhos forged an accord for the fourth generation of shareholders, mandating that any family members who affiliate themselves with religious movements or political parties lose the voting rights attached to their stock.

Vogue, GQ

Globo, which also publishes the Brazilian editions of Vogue and GQ magazines, reported $4.4 billion in sales, $1.4 billion in earnings before interest, taxes, depreciation and amortization, $1.1 billion in profit and net cash holdings of $2.6 billion last year, published financial statements show. It also holds a 6 percent stake in publicly traded cable-TV operator Net Servicos de Comunicacao SA, valued at $270 million.

After subtracting the earnings that correspond to its ownership in Net, Globo is valued at $14.9 billion, according to data compiled by Bloomberg, when comparing its results to the average enterprise value-to-sales, enterprise value-to-Ebitda and price-to-earnings multiples of two global networks -- CBS Corp. (CBS:US) and British Sky Broadcasting Plc (BSY) -- and Mexico’s Grupo Televisa SAB (TV:US) and Megacable Holdings SAB. (MEGACPO) Enterprise value is defined by the Bloomberg ranking as market capitalization plus total debt minus cash.

Corporate Restructuring

Infoglobo Comunicacao & Participacoes SA, the family’s newspapers unit, posted $483 million in revenue, $100 million in Ebitda and $54 million in net income in 2011, according to Exame magazine’s annual company ranking. The unit is valued at about $620 million when comparing its results to the average enterprise value-to-sales and price-to-earnings multiples of five emerging-market peers: India’s Jagran Prakashan Ltd. (JAGP), Turkey’s Hurriyet Gazetecilik & Matbaacilik AS (HURGZ), Peru’s Empresa Editora El Comercio SA, South Africa’s Caxton & CTP Publishers & Printers Ltd. (CAT) and Star Publications Malaysia Bhd. (STAR)

In 2002, amid volatile local markets, Globo defaulted on $1.5 billion in debt. After Roberto Marinho’s death at age 98, his oldest son, Roberto Irineu, took charge, selling assets and renegotiating with creditors. In 2005, he completed what was then the largest corporate bond restructuring in Brazilian history. Based on an analysis of dividends and market performance since that year, each brother is estimated to hold more than $1.3 billion in cash, real estate and other outside assets, according to Bloomberg’s ranking.

Globo donates $12.5 million a year to educational and cultural causes through the Roberto Marinho Foundation, plus another $40 million in free advertising.

‘Carte Blanche’

“If we had other partners, if we were in the market, we wouldn’t be able to take such hard and radical measures such as the company mergers and asset sales we did,” Roberto Irineu said in July 2006, according to Valor Economico newspaper, which is half-owned by the Marinho family. “My brothers gave me carte blanche. They said, ‘Go for it and we’ll talk later.’”

Antonio Ermirio de Moraes, 84, left a different mark on Brazil. He, brother Ermirio Pereira, 80, and sister Maria Helena Moraes Scripilliti, 82, each own a quarter of the Votorantim industrial conglomerate, according to filings with Brazil’s securities regulator. Those stakes are each worth $6.1 billion, the Bloomberg Billionaires Index shows. Their late brother’s children -- current Chairman Jose Roberto Ermirio de Moraes, Jose Ermirio de Moraes Neto and Neide Helena de Moraes -- split the remaining 25 percent. They each each control a fortune of $2.1 billion.

Branching Out

The roots of the Votorantim industrial conglomerate trace back to 1918, when Portuguese immigrant Antonio Pereira Ignacio bought a textile factory in a city of the same name in Sao Paulo state. Jose Ermirio de Moraes, who would come to lead the group, joined the company in 1924 when he married Pereira Ignacio’s daughter Helena. In 1936, Votorantim branched out into cement, now its largest operation. The group started a steelmaker not long after, entering the aluminum (5738) business by the 1950s.

Upon Moraes’s death in 1971, he passed control to his oldest son, Antonio Ermirio. The group continued to diversify under his watch, creating nickel, pulp and orange juice units in the 1980s. He opened a bank in 1991, expanding even amid hyperinflation that often exceeded 1,000 percent a year. His brothers, Ermirio Pereira and the late Jose Ermirio Jr., and brother-in-law Clovis Scripilliti played supporting roles in the family business.

Revered Figure

Praised by presidents and fellow billionaires alike, Antonio Ermirio de Moraes is a revered figure in Brazil’s business world. In 1986, he made an unsuccessful run for governor of Sao Paulo state; the experience inspired him to write his first play, “Brazil SA.” He wrote two others --“SOS Brazil” and “Wake up, Brazil!” -- while managing one of the country’s largest conglomerates.

“Five years ago I was visited by a kid from one of these consulting firms that like to charge in dollars and speak English,” Antonio Ermirio said in November 2003, according to an interview published in Veja magazine. “When the kid told me we had to get out of the aluminum business, I excused myself and didn’t stay to hear the rest.”

Votorantim came under the formal leadership of the family’s third generation in 2001, when Antonio’s son Carlos Ermirio was named chairman of the holding company. That year, the company struck out abroad with the acquisition of St. Marys Cement Corp. in Canada. Carlos Ermirio also oversaw the 2009 acquisition of Aracruz, which merged with Votorantim’s pulp operations to create Fibria Celulose SA (FIBR3), now the world’s largest pulp producer.

Metals, Cement

When Carlos died of cancer in 2011 at the age of 55, billionaire Jose Roberto Ermirio -- another grandson of Votorantim’s founder, and son of the late Jose Ermirio Jr. -- assumed the chairmanship of the conglomerate. Votorantim’s industrial arm generated $11.9 billion in revenue last year, according to financial statements published on the conglomerate’s website.

The group’s largest publicly traded interest is its 29 percent stake in Fibria, worth $1.5 billion. Votorantim also owns smaller stakes in Peruvian metals producer Cia. Minera Milpo SAA, Colombian steelmaker Acerias Paz del Rio SA and Chilean cement company Cementos Bio Bio SA.

Steelmaking Arm

Last year, Votorantim’s cement operations sold 23.6 million tons of the material used to build bridges and houses across Brazil. It reported $4.5 billion in sales, $1.4 billion in Ebitda and $3 billion in net debt. After accounting for cement assets purchased from Cimpor Cimentos de Portugal SGPS in 2012, the unit is valued at $14.3 billion when comparing its results to the average enterprise value-to-sales, enterprise value-to- Ebitda and price-to-earnings multiples of five publicly traded peers: Mexico’s Cemex SAB, Colombia’s Cementos Argos SA, Holcim Indonesia Tbk, India’s Ultratech Cement Ltd. (UTCEM) and Cimpor.

The group’s metals arm, which mines aluminum, zinc and nickel, generated $4.5 billion in revenue and $950 million in Ebitda in 2011. After subtracting the portion stemming from its stake in Milpo, the unit is valued at $4.2 billion when comparing its results to the average enterprise value-to-sales and enterprise value-to-Ebitda multiples of five global peers: Korea Zinc Co. (010130), Aluminum Bahrain BSC, Japan’s Sumitomo Light Metal Industries Ltd., Japan’s Toho Zinc Co. and China’s Shenzhen Zhongjin Lingnan Nonfemet Co.

Votorantim’s steelmaking arm reported 3.1 billion reais ($1.5 billion) in revenue in 2011. The unit is valued at $1.5 billion when comparing its results to the average enterprise value-to-sales and enterprise value-to-Ebitda multiples of two Brazilian peers: Gerdau SA and Usinas Siderurgicas de Minas Gerais SA.

Juice Operations

Lender Banco Votorantim SA reported a book value of 6.1 billion reais and a net loss of 125 million reais in 2011. The unit is valued at $2.6 billion when comparing its book value to the price-to-book multiple of Banco do Brasil SA, which owns half of the lender.

The group’s orange juice operation reported 1.1 billion reais in revenue in 2011, and is valued at about $190 million when comparing the result to the average enterprise value-to- sales, enterprise value-to-Ebitda and price-to-earnings multiples of two U.S. fruit producers: Dole Food Co. and Fresh Del Monte Produce Inc.

Tumbling Fortune

The family as a whole has received more than $2.4 billion in dividends since 1994. After accounting for estimated market performance and lifestyle costs, each of the three living children of the founder probably holds at least $1 billion in their portfolio of liquid investments and real estate, according to Bloomberg’s ranking. A liability of $950 million was added for each of the three siblings to account for total net debt on the conglomerate’s balance sheet. Since 2002, the Moraes family has given more than $220 million through Instituto Votorantim, which promotes education and employment.

Batista, the 56-year-old head of the EBX Group Co. natural- resource startups, has seen his net worth tumble 43.1 percent from a peak of $34.5 billion at the end of March. In an interview with Bloomberg News earlier that month, the tycoon -- who has about 1.1 million Twitter followers -- said he represents a new “Brazilian dream” of entrepreneurial success.

“In Brazil, a country of such deep social inequality, many feel a certain embarrassment in showing off their wealth,” said Dana, the professor at Fundacao Getulio Vargas. “The same can’t be said of Eike, who seems to love the spotlight.”

To contact the reporter on this story: Alex Cuadros in Sao Paulo at acuadros@bloomberg.net

To contact the editor responsible for this story: Matthew G. Miller at mmiller144@bloomberg.net


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