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Eike | X Marks the Spot Market

empresa_mmx_eike_batista_bb_01

Source: Folha de S. Paulo

The board of directors of MPX, the energy division of the EBX group led by Eike Batista, has decided to cancel its IPO and raise fresh capital through a private transaction worth R$ 800 million, given the unfavorable conditions in the stock markets, the company said today.

The board also accepted the resignation of Eike Batista as chairman of the board of MPX, as the Folha predicted.

See: Eike to sell mining concern and gas-fired generators to pay down debt.

MPX has loans with with BNDES worth R$ 10.4 billion and owns shares worth  R$ 551.9 million.

The government has said it would take no action to prop up the group, though the current government has funneled funds earmarked for development to the group. OGX, the oil and gas arm of the X Group, saw its shares downgraded by S&P last week.

See: Foreign investor is concerned with the exposure of banks in the X Group.

The recommendation to cancel the offering and seek a private investor comes from BTG Pactual, which has acted as a financial adviser to the EBX Group.

Furthermore, according to MPX, “important investors and shareholders in MMX have shown no interest in taking part in an IPO.” Eike and MPX management control 29% of the company; the German E.ON controls 36% and the remainder circulates in the stock market.

An E.ON spokesperson confirmed only that Batista’s resignation was “a personal decision.” Shares in X Group companies suffered heavy losses in the Bovespa in recent weeks during a crisis of investor confidence concerning the financial condition of the companies and delays in certain projects.

“For this reason, BTG believes an IPO is not viable given the original structure of the company at this time,”according to a note from an MPX note. Initially, the transaction was expected to raise at least R$ 1.2 billion.

The private deal will be promoted at a share price of R$ 6.45 per share, the closing price of MPX shares on Wednesday.

A portion of the R$ 366.7 million deal will be assumed by E.ON, which in March closed a deal to acquire an additional 24.5% of the company in a transaction worth R$ 1.5 billion.

The remainder was to be assumed by BTG Pactual, which signed an agreement to capitalize the company in case the current shareholders do not subscribe the remaining shares.