SAO PAULO/RIO DE JANEIRO (Reuters) - Brazilian billionaire Eike Batista's EBX Group, a once high-flying industrial conglomerate, began breaking up on Thursday, the latest victim of a decade-long commodities boom that has come to a screeching halt.
Batista, the founder and vital force behind the oil, energy, port, shipbuilding and mining group who branded all his companies with an "X" for "the multiplication of wealth," stepped down as chairman of MPX Energia SA
The electricity generation company will also change its name by October to position itself outside the EBX group, MPX executives said on a conference call.
The move crosses Batista out of MPX as the value of his wider empire, once valued at about $60 billion, crumbles. Once Brazil's richest man, Batista's personal stake in EBX has shrunk by more than $20 billion in the last year, as promises of oil wells, ports, power plants and ships failed to materialize.
Most EBX Group shares are now almost worthless and debt trades at levels suggesting default, and leading investors to question Batista's promise to invest more. With Brazil's economy struggling, its currency weakening and Chinese demand - the driving force behind the Brazilian boom of the last decade - slowing, investors have little appetite for new investment.
"Batista's plight is like Brazil's, a sign we can no longer ignore the country's plight," said Alexandre Barros, founder of Early Warning, a Brasilia political risk consultancy. "Batista got investors excited about Brazil's potential, which was real, but like Brazil, Batista failed to deliver."
Batista's departure comes after MPX canceled a 1.2-billion-real ($528 million) sale of stock to controlling and minority shareholders. The offer became untenable as market conditions deteriorated, the company said in a securities filing. Grupo BTG Pactual SA
Instead, MPX will sell 800 million reais of stock at 6.45 reais a share in a so-called private placement in which Batista, partner E.ON SE
"This is very good for MPX," said Ricardo Correa, energy company analyst with Ativa Corretora, a Rio de Janeiro brokerage. "MPX is the best company in the group and they are working quickly to insulate the company and separate it from the risk associated with Batista's EBX group."
MPX stock, which had fallen 42 percent this year, jumped as much as 13 percent before trimming gains to 4.2 percent in early afternoon trading Thursday in Sao Paulo.
OGX Petróleo e Gás Participações SA
For Adriano Pires, founder of the Brazil Infrastructure Institute, a Rio de Janeiro energy think tank, Batista's departure from MPX and the gains in many EBX shares on Thursday show investors think breaking EBX apart may be the best way to protect their investments.
"They have to do something and do something fast to isolate the different parts of the group from the backlash against Batista so that Batista and EBX can have the space to stop the rot and restructure the group," Pires said.
E.ON TAKES CHARGE
Under the now-scrapped stock-sale plan, shares were to be sold at 10 reais each, as part of E.ON's $1 billion purchase in March of a stake in MPX. Under the new plan, E.ON has agreed to buy up to 367 million reais worth of stock in the private placement, while BTG Pactual committed to buy the remainder.
E.ON owns 36 percent of MPX, a portion that could increase to as much as 38 percent under the private placement, MPX executives said.
While Batista leaves MPX's board, he still owns 29 percent of MPX and shares control with E.ON through a shareholder agreement, MPX said on the call, adding that there is no guarantee he will buy new stock in the offer.
Batista's stake will shrink to 24 percent if he fails to buy any MPX stock, MPX said. EBX officials did not immediately respond to telephone and e-mail requests for comment.
"We see a wide range of opportunities as a result of this capitalization," MPX Chief Executive Eduardo Karrer said on Thursday's conference call. "This is part of the evolution process of MPX as an independent entity."
IN NEED OF CASH
Proceeds from the sale will be used to "strengthen the company's balance sheet and prepare it for growth." MPX wants to participate in several government auctions for rights to sell thermal and wind power to the country's grid through year-end, Karrer said.
MPX needs fresh capital to finance about 600 million reais of generation plant investment that will transform it from a start-up to a fully operating power company.
The MPX stock sale should be concluded within the next 40 days, company executives said.
Jorgen Kildahl, a board member for E.ON, will replace Batista, who founded MPX in 2001, on an interim basis, an E.ON spokesman said. Batista's decision to leave the board was "personal," MPX officials said.
($1 = 2.271 Brazilian reais)
(Additional reporting by Alonso Soto and Christoph Steitz; Editing by Todd Benson and Theodore d'Afflisio)
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