Most things Brazilian billionaire Eike Batista does publicly
make headlines. But a $2 billion deal for a stake in his holdco
– EBX – from Mubadala Development Company got
LatAm growth companies dreaming.
The world’s sovereign wealth funds are highly
prized private investors, however, actual transactions in Latin
America have been few. So for Mubadala, Abu
Dhabi’s sovereign vehicle, this was a double first
– its first LatAm investment, and the first time
Batista had let a strategic partner into his holding company,
the umbrella for one of Brazil’s most visible and
The deal gave Mubadala preferred equity securities worth
5.63% – the unusual decimal reflecting
Batista’s penchant for his favorite number
– of the Centennial Asset Brazilian Equity Fund, the
vehicle through which Batista controls EBX.
The proceeds are to be used in the underlying businesses of
new ventures. It underscores the small but growing trend of
big-ticket Middle East equity investments in LatAm, following
the pre-IPO investments in Santander Brasil and a pre-IPO piece
of BTG Pactual made by others.
"Mubadala decided to use Eike [Batista] as a vehicle for
Brazil," says Marcus Silberman, co-head of global emerging
markets M&A at Credit Suisse, which with Itaú
advised EBX on the transaction. Goldman Sachs advised
The price suggested a valuation of $35.5 billion for the
privately held group, which is made up of 11 known business
units, analysts said at the time. This is a guess, of course,
as only five members of the EBX family were publicly
Basing the measure purely on the value of the listed
companies, the price paid by Abu Dhabi was a 40% premium above
market value, according to an estimate at the time by Gustavo
Gattass, head of research at BTG Pactual. However, the
valuation could be affected by many factors, such as the size
of EBX’s cash position, which there is no way for
the public to know.
Bankers say they are spending more and more time pitching
sovereign wealth funds with investment opportunities in a
diversifying number of LatAm sectors, with the caveat that
Middle East buyers need size. Interest is up, but the
transactions are hard to put together – they say, as
few details of their makeup ever make it public. Silberman says
discussions with Mubadala lasted for more than one year.
"There is a lot of interest," Silberman says. "Mubadala will
continue to look for opportunities in Brazil. This trend will
continue. Latin America is rich in natural resources."
This interest does not yet appear for public equity
transactions, in which tickets are not big enough to meet
buyers’ appetite for large stakes. At this point,
sovereign funds have a preference for pre-IPO investment in big
names that are sector leaders. Natural resources, financials
and infrastructure – particularly if Canadian pension
funds are included in the government-linked basket –
have been the main areas, as the tendency starts with the most
Others in the non-government space have followed Mubadala
into Batista companies, with GE coming into EBX in May for $300
million, on similar terms to Mubadala. At the operating company
level, Germany’s E.On had already bought in to
$472 million of power generator MPX.
The deal was also well timed from Batista’s
point of view. It came before his OGX oil and gas company
announced lower production targets in June. OGX shares
plummeted, and the news had a knock-on effect on
Batista’s other companies. Since then, Batista
appears to have put off plans to IPO other units, even EBX
itself, and has put more of his own cash into the companies.