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Stewing in it

1 June 2012 By Raul Gallegos

Eike Batista’s EBX feijoada is getting harder to stomach. The Brazilian billionaire’s latest initial public offering, of his holding company’s coal subsidiary CCX last week, went down badly in the market, with the shares off 29 percent. Five of Batista’s six other listings have done poorly, too, including big falls for the shipbuilding and logistics arms. Even optimistic investors can’t keep digesting such slop.

Brazil’s richest man – seventh on the global Forbes list with estimated wealth of $30 billion – has cooked up a good sales pitch. In addition to the public investors he continues to attract, Batista recently persuaded Abu Dhabi and General Electric to buy into his empire. The $300 million deal struck with GE last week for 0.8 percent of EBX imputed a valuation of nearly $38 billion for the unlisted holding company.

But Batista has mostly dished out a dream. Since going public two years ago, the OSX shipbuilding unit has shed over half its value, while Brazil’s Bovespa index is down 22 percent over the same span. Shares of the LLX logistics division, which went public in 2008, are also down by half. The flagship $17 billion OGX oil and gas business and the MPX energy arm are also underperforming the broader market by a wide margin.

EBX is still young. OGX just pumped its first barrel of crude in January, four years after its IPO. It lost nearly $300 million in the last fiscal year and stands to burn more cash before it gets up to speed. OSX also loses money, while relying on sister firm OGX as its main customer. Even the MMX iron ore unit, the only one of Batista’s listed businesses whose market value has improved post-IPO, is plagued by project delays and manages only modest production levels.

The future isn’t evidently brighter either. Not long ago, Batista was heralding dividends from EBX companies in 2014, but just pushed that date out by a year. With oil prices falling and Brazil’s growth waning, it’s not obvious how much longer Batista can promise jam tomorrow. For now, investors are left to stew in the EBX juice.


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