Batista Seen Divesting Most Assets in Fire Sale, UBS SaysJuan Pablo Spinetto
Eike Batista, the billionaire whose wealth shrank by more than $30 billion, is expected to put most assets on sale, triggering interest from buyers that may include Keppel Corp. and EON SE, UBS AG said.
LLX Logistica SA, Batista’s port developer unit, and OSX Brasil SA, his shipping venture, are the most interesting assets for companies seeking fire-sale purchases to expand in Brazil, UBS analysts including Lilyanna Yang said in a note today. While the billionaire’s holding company, EBX Group Co., is expected to find buyers for many of its assets, the price is likely to be “lower than fair value,” they said.
“The group seems to us to be in such financial difficulty that suggestions of a fire sale appear to make sense,” the UBS analysts said in the note, titled “Is there anything left for EBX investors?” “A seller under financial stress is very rarely able to raise the fair value of its assets under fire-sale.”
Batista, the world’s eighth-richest person in March 2012, lost more than $30 billion of his fortune after failure to meet output and profit targets prompted a selloff of shares in his Rio de Janeiro-based energy, commodities and logistics units. The billionaire is now divesting assets, restructuring debt and trimming projects as he faces investors’ complaints.
Singapore-based Keppel and Sembcorp Marine Ltd., the world’s two-biggest oil-rig makers, may be interested in bidding for OSX’s shipyard in Rio state, according to UBS. Germany’s EON may be eyeing natural gas blocks owned by Batista’s oil unit OGX Petroleo & Gas Participacoes SA, it said.
EBX declined to comment on the UBS note when contacted by Bloomberg News today. Josef Nelles, a spokesman at EON in Dusseldorf, Germany, declined to comment on a possible interest in OGX’s Parnaiba fields. E-mails sent after regular working hours in Asia to Keppel and Sembcorp press officials were unanswered.
LLX jumped 8.7 percent to 1 real in Sao Paulo, its highest closing level since June 27. OSX gained 11 percent and OGX advanced 1.9 percent.
OGX, whose market value collapsed to the current 1.72 billion reais ($773 million) from as much as 75.2 billion reais in 2010, isn’t expected to sell additional oil assets after agreeing in May to divest 40 percent of an offshore field to Malaysia’s Petroliam Nasional Bhd., UBS said. Brazilian companies and private equity groups are also buying candidates for EBX assets, the analysts said.
“The caveat is that the timing is unclear, and might include lengthy negotiations, which could involve banks and creditors, as well as Eike Batista himself,” UBS said about potential asset sales.
Batista, 56, said in an opinion piece in newspaper Valor Economico on July 19 that auditors are partly to blame for building up shareholder expectations of his companies. He also said he regrets taking his companies public, adding that he will pay back all his debts.
The tycoon this month quit as chairman of MPX Energia SA, the power utility he founded and listed in 2007. Earlier this year, EON boosted its stake in the company to 36 percent and took over management. Batista’s MMX Mineracao & Metalicos SA mining company said on June 26 it’s in talks to sell a stake or assets to companies including Glencore Xstrata Plc and Trafigura Beheer BV.
Interest in a stake in MPX will probably be limited to potential buyers in Brazil and Batista is unlikely to sell his remaining share of the business until holding company EBX’s debt situation is resolved, UBS said in the report. A potential acquisition of MMX units by Glencore matches the trading company’s strategy of buying “good quality assets at distressed prices,” UBS said.
Batista, whose ventures span from commodities to real estate and a Chinese restaurant in Rio, is worth $3.4 billion after losing 73 percent of his wealth in 2013, according to the Bloomberg Billionaires Index.