Brazilian billionaire Eike Batista is selling the best performing of his six publicly traded companies in an effort to raise cash after his commodities and energy empire had a combined $458 million net loss in the second quarter.
Batista, whose net worth plunged $12.5 billion since March after delays at his oil startup triggered a stock selloff, is negotiating to sell shipbuilder OSX Brasil SA to Sete Brasil Participacoes SA in exchange for a stake in the oil-rig contractor, according to two people with direct knowledge of the matter. The talks follow an agreement to sell a 49 percent stake in Batista’s AUX gold business to the Qatar Investment Authority for about $2 billion, a person with knowledge of the transaction told Bloomberg in June.
Batista, 55, has already announced four other divestures this year as he slows the pace of expansion into mining and energy across Latin America and focuses on raising the cash to increase output at his existing companies. All six of Batista’s traded companies had negative cash flow in the second quarter.
“He has a lot of projects, so the question now is of funding for the projects he already has,” said Andre Castello Branco, a partner of corporate finance at PriceWaterhouseCoopers LLP. “The projects are getting bigger, so there needs to be some sort of negotiations to raise that capital.”
EBX Group Co., the holding company for most of Batista’s assets, denied the billionaire is in talks to sell OSX in an e-mailed statement today.
Rio de Janeiro-based OSX rose 8.7 percent in Sao Paulo this year, the only one of Batista’s companies to post gains in the stock market, as it announced contracts to build vessels for clients including Petroleo Brasileiro SA.
Batista’s oil unit OGX Petroleo & Gas Participacoes SA fell to a three-year low in June after cutting output estimates at its first project by as much as 75 percent, triggering a selloff at Batista’s other companies. OGX has declined 53 percent this year, the worst performer on the benchmark Bovespa index, which is up 6.6 percent, while Batista’s iron-ore miner MMX Mineracao & Metalicos SA lost 21 percent and power utility MPX Energia SA declined 14 percent.
OSX dropped 1.5 percent to 12.50 reais at the close in Sao Paulo today, while OGX dropped 2.9 percent, MMX fell 0.9 percent and MPX lost 1.4 percent.
The deal with Sete Brasil would give Batista, Brazil’s richest person, a better chance at scoring contracts for $27 billion in deep-water drilling vessels being ordered by Petrobras, a minority shareholder in Sete Brasil.
OSX and Sete Brasil would combine operations to provide services to Petrobras, according to the people with direct knowledge, who asked not to be identified because the matter is private. Talks, which are in an early stage among Sete Brasil shareholders and Batista, may not result in a deal, the people said.
Sete Brasil said none of its directors are involved in negotiating a merger, according to an e-mailed statement from its press office.
A deal with OSX may not make sense because Sete Brasil was created to act as a mediator between Petrobras and shipbuilders, said Adriano Pires, head of consulting firm Brazilian Center for Infrastructure, or CBIE.
“From the moment that Sete Brasil buys part or all of OSX, it will lose that feature because it will become the owner of a shipyard,” he said in a telephone interview from Rio de Janeiro. “Petrobras, as a partner at Sete, will also be a partial owner of the shipyard.”
Batista is pursuing a strategy of finding partners to help his companies reach their goals by providing funding and expertise, said Dany Rappaport, who helps manage about 250 million reais at Investport in Sao Paulo.
“Sete Brasil’s partners are very strong, with an elevated capacity for investments,” he said in a telephone interview yesterday. “It’s not a change in Eike’s strategy.”
OSX’s press office declined to comment yesterday. Qatar Investment Authority’s press office in Doha also wouldn’t comment.
Batista’s net worth, which peaked at $34.5 billion on March 27, was $22 billion as of yesterday, making him the world’s 26th richest man, according to the Bloomberg Billionaires Index daily ranking. Batista raised about $6 billion in share sales in the past six years and at least $4.1 billion in bond sales in international markets since 2011.
Batista this year sold stakes in EBX valued at $2.3 billion to Mubadala Development Co. and General Electric Co. He also completed deals with EON AG and International Business Machines Corp., which acquired stakes in his electricity and technology units. In June, he said he expected to find buyers for 30 percent to 50 percent of his coal unit CCX Carvao da Colombia SA by the end of the year after hiring Morgan Stanley to help find a partner.
Sete Brasil Chief Executive Officer Joao Ferraz said on Sept. 19 the company was close to raising 3.7 billion reais in additional capital, boosting its total equity to 11.3 billion reais. Banco BTG Pactual SA’s private-equity funds invested $1 billion in Sete Brasil, more than doubling their stake in the oil-rig operator to 30 percent, four people with direct knowledge of the deal said in August.
OSX, which is in talks to build 10 more vessels after winning orders worth $7 billion, sees a “good outlook” for its negotiations with Sete Brasil to provide drilling ships, Chief Executive Officer Carlos Bellot said at a news conference in Rio on Sept. 17.
The oil industry has enormous demand for drilling platforms and a deal between OSX and Sete Brasil would help reduce the risks for the companies involved in the projects, PwC’s Castello Branco said.
“This increases the scale and helps reduce the risk for everyone,” he said. Batista “always has something happening.”