Besieged Brazilian billionaire Eike Batista is in “advanced talks” to sell MMX Mineração e Metálicos S.A., its flagship iron ore mining company, to an eventual joint venture between Glencore Xstrata and Brazilian investment bank BTG Pactual, reports Valor Economico (in Portuguese, subs. required).
According to the Folha de S.Paulo paper (in Portuguese), however, Dutch trading company Trafigura is also interested in Batista’s firm, which has suffered a series of setbacks of late.
In January this year, Brazil’s tax agency struck MMX with a $1.8 billion tax fine, an amount equivalent to nearly 80% of its market value. Two months later, the firm reported a much-higher-than-expected $400 million loss.
The loses added to Batista’s existing financial woes. By then he already had $2.8 billion in outstanding loans with the Itau Unibanco Holding SA in Sao Paulo. Additionally, he owes $2.4 billion to Banco Bradesco SA plus another $805 million to Grupo BTG Pactual, which also gave him a $1 billion line of credit.
His lenders are growing anxious, and market rumours indicate the mining magnate will have to reorganize — and subsequently lose control of — his declining empire.
To avoid this and raise cash, Batista has been selling off other assets.
Last year, he sold part of his EBX to General Electric Co. and Abu Dhabi’s Mubadala Development Co. Batista’s also been trying to sell all of his gold company AUX, as well as shipbuilder OSX Brasil SA. Batista is also reportedly in talks to sell MPX to Germany’s E.ON.
Born into mining, the son of a former CEO of Vale saw his fortune topping out at a spectacular $32.8bn in April last year, after his OGX struck oil (turns out not very much) off the Brazilian coast giving credence to his stated goal of becoming the richest person in the world.
But these days his divestiture strategy – including an offload to Abu Dhabi and new lines of credit from billionaire buddy Andre Esteves – has more than a whiff of a fire sale as his five public firms run out of capex funds and creditors start making collateral calls.
MMX shares gained 10% Tuesday morning, to 1.54 Brazilian reais ($0.70) on the eventual sale news.
The company said in a regulatory filing yesterday that it had hired financial advisers to “evaluate business opportunities.”
