Abu Dhabi state investment fund Mubadala said on Monday it will buy a $2 billion stake in Brazil’s EBX Group, providing fresh capital to the Brazilian conglomerate as it boosts spending on oil, ports, shipyards, mines and electricity.
Mubadala, which has stakes in General Electric and private equity firm Carlyle, said the investment will give it a 5.63 per cent preferred equity interest in Centennial Asset Brazilian Equity Fund, the personal investment company of Brazilian billionaire Eike Batista, who is behind the EBX Group.
The investment comes as EBX seeks to raise an additional $1 billion for its shipbuilding and ship-leasing company OSX Brasil and billions more in debt and equity capital to expand oil and gas output, complete port facilities, build thermal power plants, and dig iron ore and coal mines.
“For EBX this is a kind of farm-out with a strategic investor,” Batista told Reuters in a telephone interview. “They (Mubadala) have spent a year in our offices doing due diligence,” he said, adding that “their confidence provides more proof of our investment potential.”
“They do know a bit about oil,” he said of Mubadala, based in the oil-rich UAE. For Batista, Mubadala is the latest in a string of international partners, including Germany’s E.ON, Portugal’s EDP and General Electric that show confidence and “branding” for his projects, most of which are still in start-up stages.
The investment in EBX is the biggest ever in Latin America by the $46 billion Mubadala fund. The fund is looking to Latin America and other emerging markets for faster growth than more developed markets in North America and Europe.
“This … transaction marks our first significant direct investment into one of the fastest growing markets and is an important step in Mubadala’s development of strategic opportunities in Brazil and Latin America,” Khaldoon al-Mubarak, Mubadala’s chief executive and managing director, said in a statement.
The EBX investment follows a report this week that Mubadala is in talks to take a stake in a Guinean bauxite joint venture.
Through Centennial, the investment gives Mubadala an indirect stake MMX, LLX, MPX, OSX and OGX as well as in sports marketing, gold mining, healthcare, beauty products and entertainment companies.
While most EBX companies are in the start-up phase, the group is expected to generate $15 billion in annual operational earnings by the end of 2015, Batista, Brazil’s richest man, said in August.
The deal will also give Mubadala, which has assets worth about $46 billion, “participation in both EBX and Mr. Batista’s pipeline of future investment opportunities, such as technology companies, cement, fertilizers, entertainment and others,” the company said.
The fertilizer investments are planned for Brazil’s northeastern state of Maranhao, where MPX and OGX have large natural gas resources. Mubadala and EBX hope to produce crop nutrients for Brazil’s growing agricultural frontier in the country’s northeast and Cerrado region using that gas, Batista said.
“The next 30 million tonnes of Brazilian grains production is going to come from this region and we are close to it with cheap gas,” Batista said. “Mubadala is very interested in food security and growth crops to supply the Emirates with food.”
He also hopes the investment will help him speed up construction at OSX’s shipyard on the grounds of LLX’s Port of Acu, north of Rio de Janeiro.
While EBX is based in Brazil, Batista and his EBX companies also have mining and port assets in Chile and Colombia, which could help open those markets to further Mubadala investment in Latin America.
Mubadala is seeking ways to use its oil revenue to develop and sustain Abu Dhabi and its social services in view of diminishing oil reserves.