Brazilian billionaire Eike Batista plans to sell as much as $2.2 billion of new shares in his MMX Mineracao & Metalicos SA business to investors including South Korea’s SK Networks Co. to fund transport and mine projects.
SK, a Seoul-based trading company, agreed to take a $700 million stake in the iron-ore miner and will pay 13.963 reais ($8.13) a share, the Rio de Janeiro-based company said today in a Brazilian regulatory filing. MMX also agreed on a “long-term” contract to supply SK with iron ore as part of the deal.
Batista, who bought his first gold mine at age 24, more than tripled his wealth in the past year to $27 billion to be listed by Forbes as the eighth richest man. His EBX Group Ltd. holding company aims to tap oil, iron ore and coal deposits in South America, generate electricity and create a port complex to facilitate exports to Asian markets.
MMX will use proceeds from the share sale to buy the Sudeste port project in southeastern Brazil from the entrepreneur’s LLX Logistica SA for $2.3 billion and to acquire new iron-ore reserves in Brazil’s Minas Gerais state, according to the statement.
LLX shareholders will be paid partly with bonds that will entitle holders to payments of $5 per metric ton of iron-ore shipped from the Sudeste port, said Paulo Gouvea, head of corporate finance at EBX. Shareholders will be able to choose whether to receive the other part in stocks or cash, he said on a conference call with reporters.
LLX slumped 6.5 percent to 10.10 reais in Sao Paulo trading, the most since May 11, on concern the payment in bonds will mean investors will get less cash than they had expected. MMX rose 1.6 percent to 13.14 reais.
“The profile of the deal may not have been as good as some people thought,” said Rogerio Freitas, a partner at Rio de Janeiro-based hedge fund Teorica Investimentos. “Maybe they thought there would be more cash up front.”
MMX may partner with an Asian steelmaker to build a mill in Brazil or abroad as the acquisition of the port will likely lure investments, Batista said today on the conference call.
Batista’s EBX Group Ltd. holding company will own 35 percent of MMX after the deal, and SK will own 11 percent, MMX Chief Executive Officer Roger Downey said on the conference call.
Batista is also seeking to sell assets in oil producer OGX Petroleo & Gas Participacoes SA and may sell shares of AUX, a gold-mining company he’s creating in Colombia. The potential offer comes when Petroleo Brasileiro SA, the Brazilian state-controlled oil producer, is seeking to raise as much as $78 billion in a share sale and Repsol YPF SA has said it wants to sell shares in its Brazilian business by the end of the year.
Cnooc Ltd. and China Petrochemical Corp. may offer at least $7 billion for oil assets in OGX, two people with knowledge of the matter said last week. Batista said today that such an amount would only buy a “tiny” stake.
Steel prices in China fell as much as 17 percent between April and July as the government curbed property speculation, slowing demand for steel in construction and the key iron ore raw material. About 40 percent of steelmakers in the country idled plants or put them on maintenance, the China Iron and Steel Association said Aug. 3, without specifying the period.
Iron ore prices from Rio Tinto Plc, BHP Billiton Ltd., Vale SA for iron ore shipments to China in the fourth quarter of the year dropped from 10 to 13 percent on the previous quarter, Sina.com reported Sept. 10, citing an unidentified Chinese steelmaker executive.