US-based EIG Global Energy Partners has acquired LLX, the logistics company behind one of Brazil’s largest-ever infrastructure projects, for R$1.3 billion (€413 million, $562 million).
LLX is part of EBX, the energy and mining empire built by Brazilian tycoon Eike Batista. The transaction will inject enough cash for LLX to finish its Açu Superport, an industrial complex 1.5 times the size of Manhattan designed to service the country’s booming commodity exports to Asia.
“We believe Açu is a world class asset and will be a critical piece of infrastructure in allowing Brazil to realise its energy and resource potential. We are pleased to provide the missing piece of capital necessary to bring this important project to completion,” said R. Blair Thomas, chief executive of EIG, in a statement.
The deal is the largest divestment yet made by EBX, as Batista, formerly Brazil’s richest man, seeks to raise cash to save his crumbling conglomerate. He is to leave LLX’s board upon completion of the transaction, but will retain a significant stake in the company as well as the right to appoint a member of the board.
Founded in 1983, EBX comprises five companies listed on the BOVESPA stock exchange. Operating in the oil, gas, logistics and mining sectors, these have grown fast on the back of readily available debt in Brazil and strong demand for energy and mineral resources from China. The letter X, present in all of their names, is said to signify multiple returns.
But a series of project delays, production disappointments and worries over leverage have led profits and investor confidence to dwindle at the group, sending its shares to a fraction of their original valuation. Once worth around $60 billion, EBX’s assets are now valued at less than $5 billion.
This has led Batista to talk to his creditors to try and alleviate the group’s heavy debt burden. Reuters reported in July that Abu Dhabi-based sovereign fund Mubadala Development Company, as well as local banks Itau Unibanco and Banco Bradesco, had agreed to refinance EBX’s debt.
The group’s problems also have created an urgency for Batista to raise cash, which he has sought to do by divesting the most solvent units of his conglomerate. The first such step was taken in July, when he sold MPX Energia, a power generation business, to German utility E.ON.
The equity provided to finance the LLX deal will be provided by EIG’s Energy Fund XV, which closed on $4.1 billion in 2012. The firm is raising the vehicle’s successor with a target of $4.25 billion.
EIG spun out from Los Angeles-based asset manager TCW in 2011. Fund XV, the first vehicle closed by the firm after gaining independence, surpassed both its original $2.5 billion target and $3.5 billion hard-cap.