Brazilian tycoon Eike Batista agreed to cede control of port operator LLX Logistica to U.S. investment group EIG Global Energy Partners, one of the biggest steps in the breakup of his once high-flying energy and mining empire Grupo EBX.
Washington, D.C.-based EIG will invest 1.3 billion reais ($562 million) in LLX Logística SA, providing enough cash to help finish the Açu Superport in Rio de Janeiro state, which is thriving on Brazil’s decade-long commodity boom.
The deal will give EIG control of LLX. Batista, 56, currently LLX’s largest shareholder, will leave LLX’s board when the deal is finished but will retain a “relevant” stake and also have the right to name a member to the board.
The move marks an important step in Batista’s efforts to shore up EBX, which was once valued at $60 billion but suffered from a series of project delays, rampant assumption of debt and dwindling confidence in some of its main companies. The value of EBX assets, which range from logistics to oil and gas to mining and shipbuilding, is now less than $5 billion.
The breakup of EBX began early in July, when Batista stepped down as chairman of MPX Energia SA, the embattled EBX Group’s most promising company, ceding control of the company to Germany’s E.ON SE.
Expectations of a deal pushed shares of LLX up 17 percent on Wednesday, and the stock led gains in Brazil’s benchmark Bovespa stock index. The stock is down 46 percent so far this year - the best-performing asset among Batista’s six listed companies in Brazil.
EIG has been involved in energy and energy-related infrastructure for more than 30 years, investing more than $15 billion in about 290 energy companies and projects in 34 countries, according to its Website. Calls to its offices were not returned.
LLX’s star project is the Açú Superport, part of an industrial complex that is 1 1/2 times the size of Manhattan and home to an iron ore terminal and dock where Anglo American Plc plans to ship its output next year. The Anglo American terminal is a joint venture between LLX and Anglo American.
Other companies that plan projects at the site include General Electric Co and offshore engineering company Technip SA. MPX plans to build coal and gas-fired power plants at the port and EBX-controlled OGX Petróleo e Gás Participações SA is planning oil storage and processing facilities for the area.
The port, which is on land expropriated by Rio de Janeiro state, is one of the few major port infrastructure projects to come close to completion since the start of Brazil’s commodities rush a decade ago.
Despite Batista’s personal financial problems, analysts say LLX’s port project is one of the most likely parts of the EBX group to succeed because of Brazil’s lack of essential transportation infrastructure and facilities to develop new offshore oil reserves in the seas off the coast where the Port of Açu is being built.
Still, the Açú port is running into increasing opposition from some local farmers and environmentalists, saying there is growing evidence that the port’s construction threatens a sensitive ecosystem.
Batista, whose fortune was ranked by Forbes Magazine as the world’s seventh-largest last year, is selling assets in his struggle to keep some of the EBX companies afloat, and using cash to reduce debt.
In recent weeks, Batista has renegotiated debts with Abu Dhabi sovereign wealth fund Mubadala Development Co PJSC and local banks Itaú Unibanco Holding SA and Banco Bradesco SA, sources familiar with the situation told Reuters.
EBX might be on the brink of more deals as Batista exits some of the group’s companies to repay debt. Mubadala is looking for partners to buy stakes in oil producer OGX and miner MMX Mineraçao e Metálicos SA, a source told Reuters on Wednesday.
When restructuring of EBX ends, Batista will be left with between $1 billion to $2 billion of assets and $1.7 billion of long-term debt, sources said. That is only a sliver of his former fortune, which last year reached about $35 billion.
Under terms of the deal, EIG will buy LLX stock for 1.20 reais a share each, the filing said. Minority shareholders will be allowed to participate, it added.
The transaction is subject to regulatory and corporate approvals as well as the execution of due diligence procedures by EIG, LLX said in statement. (Reuters)