Eike Batista is giving up control of one of his mining and energy companies for the first time as EON SE agrees to become the largest shareholder of power utility MPX Energia SA, the billionaire’s most indebted unit.
Germany’s biggest utility will share management decisions with Batista after it acquires 25 percent of MPX’s shares from the Brazilian tycoon for as much as 11 reais each, or a total of 1.56 billion reais ($776 million), the Rio de Janeiro-based company said in a statement today. The sale will reduce Batista’s stake to 24 percent from 54 percent and increase EON’s ownership to 36 percent.
Shares in Batista’s public companies have declined as much as 84 percent in the past year after his OGX Petroleo & Gas Participacoes SA cut oil output targets, erasing more than $25 billion of his personal fortune. The deal with Dusseldorf, Germany-based EON will strengthen MPX’s finances and allow it to boost growth, MPX Chief Executive Officer Eduardo Karrer said.
“You can expect a lot of growth this year and the coming years with this new shareholder structure,” Karrer said on a conference call today.
The utility is building coal and natural gas power plants, as well as wind and solar projects to profit from an expected 21 percent increase in Brazil’s electricity demand through 2020, according to information on its website. It has a stake in gas fields operated by OGX in northeastern Brazil and uses the fuel at its plants in the region.
MPX will also offer at least 1.2 billion reais in shares to other investors to raise capital, the company said. The shares, which have fallen 15 percent this year, dropped 2 percent to 9.50 reais at the close in Sao Paulo.
The company hired Banco BTG Pactual SA to carry out the share sale for at least 10 reais a share. EON said it plans to buy 31 percent of the share sale, or at least 367 million reais of stock. MPX plans to conclude the sale to EON in 30 to 40 days and then start the public offer, Karrer said.
Brazil’s state development bank BNDES, which has a 10 percent stake in MPX, said it’s considering buying shares in the offer.
The deal will give EON a vehicle for growth in Brazil, the second-biggest emerging market after China, MPX said, adding it will get management support from EON as it expands power generation plants to meet robust growth in electricity demand. Karrer will remain as CEO.
The two majority shareholders will exercise their voting rights in MPX on an equal basis enabling them to manage and develop the company together, EON said. EON said it will be entitled to increase its representation on MPX’s board of directors.
MPX’s net debt increased 25 percent to 5.48 billion reais last year, the biggest amount of Batista’s six publicly traded units, data compiled by Bloomberg show. While the company managed to almost triple sales in 2012 after starting commercial operations, net losses widened 6.5 percent to 435 million reais. Its total debt of 6.07 billion reais at the end of last year corresponds to about 1.1 times its market value.
MPX won’t use proceeds from the capital increase to pay debt, MPX executives said on the conference call.
Batista, 56, is trying to reduce collateral requirements by selling assets to pay debt, people familiar with the matter said March 18. He used shares of his publicly traded companies as collateral for loans that helped build his empire of commodities and energy businesses, held as units of his EBX holding company.