Eike Batista Persists With Holdco IPO

Despite last week’s poorly received shipping unit float, Brazilian tycoon Eike Batista will likely push ahead with a plan to IPO his holding company, EBX. The holdco owns majority stakes in 5 publicly traded companies with a combined market cap of BRL75bn, say bankers and investors familiar with the Batista empire. The weak performance of OSX’s IPO versus expectation – it raised BRL2.8bn, 62% less than what was originally targeted – led some to presume an EBX float was off the table. However, some investors think differently. “I don’t think there’s any contamination here,” says a Rio-based portfolio manager with BRL4.5bn under management. “[The OSX IPO] doesn’t mean the market is closed for EBX,” he adds. “EBX management will have to demonstrate what their differential is, and that the holdco is not merely a sum of the [publicly listed parts] but rather a company with a unique asset that can generate growth,” he adds. The investor notes a case can be made for investing in Brazil holdcos, pointing to Telemar, Bradespar, Metalurgica Gerdau and Itausa as examples. A banker close to Batista claims EBX will offer investors a way to participate in the future growth spurts of his projects. “Investors will participate in the value creation since the very beginning, when [Eike’s] projects often see the steepest growth curves,” he notes. EBX’s stakes in the publicly listed companies are worth $30bn, he estimates, with another $10bn or so in unpriced assets like real estate, forestry, entertainment and gold ventures. The public value of EBX could settle at around $30bn assuming a 25% or so discount to recognize the fact it is a holdco, and not an operating company. An investor says Credit Suisse is among banks tapped to lead, and that an early version of a prospectus for EBX’s IPO has already been produced.