Monday, 16 March 2009

Até Tú, Eike? LLX Brings BNDES in as Shareholder -- Meaning Business Isn't Going Too Well, Right?

X-Man: The days he used to talk happilly about ex-wife Luma
and his almost always money-making business ventures

The following is the text of a press release we just got, from LLX Logistica SA, the logistics arm of Brazilian billionaire Eike Batista's massive yet illiquid empire.

Rio de Janeiro, March 16th 2009. LLX Logística S.A., an EBX Group Company, hereby announces that, BNDES PARTICIPAÇÕES S.A. - BNDESPAR, a wholly-owned subsidiary of the Brazilian Development Bank (BNDES) ("BNDESPAR"), approved in a Board of Executive Officers Meeting the subscription of shares in the LLX´s capital increase. This capital increase will be effective upon the execution of an agreement among the Company´s controlling shareholder, Mr. Eike Batista, his subsidiary Centennial Asset Mining Fund LLC ("Centennial"), Ontario Teachers´ Pension Plan Board ("OTPP") and BNDESPAR.

The capital increase of R$ 600 million results from the issuance of 333,333,335 new common shares and will be priced at R$ 1.80 per share which represents a premium of 27% over the volume weighted average price of the last 60 trading days. Under this agreement, BNDESPAR shall subscribe the equivalent of 25 percent of the total newly issued shares, representing R$ 150 million, and resulting in an equity stake in LLX of 12.05 percent.

BNDESPAR will become LLX´s shareholder through the assignment of a portion of the preemptive rights of the controlling shareholder, Centennial and OTPP in favor of BNDESPAR. In consideration for the assignment of these preemptive rights, BNDESPAR has granted to the Controlling Shareholder and to OTPP a call option for the purchase of 50 percent of the shares issued by the Company paid-in by BNDESPAR under this transaction. This call option will be exercisable after a 36 months period from the date on which the capital increase is confirmed, at an exercise price of R$ 1.80 per share, adjusted in accordance with the Brazilian Extended Consumer Price Index - IPCA, published by the Brazilian Institute of National Statistics and Geography - IBGE, plus a rate of 15 percent per year ("Exercise Price").
A few questions were left open -- How will this hurt minority shareholders? Will this mean that by bringing the government Mr. Batista will overcome recent problems with his projects including the Porto Brasil? Following the move, will he be able to line up new, cheaper financing for the Açú and other logistics projects?

BNDES may turn a dangerous partner in the long run -- depending on who wins the country's presidency on 2010. The BNDES is taking control of certain aspects of the Brazilian economy amid the ongoing crisis. The bank's tentacles are now on several sectors, including food, paper and pulp, mining, real estate ... As a friend used to say, in the new Brazilian economy you either are with or against the BNDES. If you are, you will be fine -- but if you aren't, run for your life.

1 comment:

  1. He is just buying at 1.8 reais per share, a value that they came up who knows how, but has guaranteed the option to re-purchase 50% of the shares at a price that I bet, will be lower than 1.8. Eike is totally with BNDES, very with.