Billionaire Eike Batista keeps SLR McLaren in living room
Published 23/06/2008 | 10:08
Eike Batista sits in the boardroom of his mining company, MMX Mineracao e Metalicos SA, overlooking Rio de Janeiro's Sugarloaf Mountain, a vitamin cocktail dripping into his left arm to stave off aging.
The intravenous bag is hanging on the pole of the green, yellow and blue Brazilian flag that stands next to the 51-year-old multibillionaire. Batista's focus isn't on the drip but on a deluge of decisions, including how to seal a $5.5 billion sale of two iron ore mines to London-based Anglo American Plc, according to Paulo Gouvea, an MMX executive who was present that January evening.
In rapid succession, according to Gouvea, Batista picks a color scheme via mobile phone for his yacht's upholstery (white and pink will do), checks his laptop computer, orders an aide to sell $200 million of unidentified shares, gets a phone briefing on the upscale Chinese restaurant he owns in Rio and reminds his assistant to book the eatery's private room for ``dinner with Cynthia,'' Anglo American Chief Executive Officer Cynthia Carroll.
Even as his businesses contend with environmental complaints, Batista is riding a wealth-creation wave in Brazil unlike few others in Latin America. Soaring commodity exports such as iron ore, which gives Batista most of his revenue, have helped the region's largest economy break a cycle of boom and bust.
The value of Brazilian exports had tripled as of May 31 from Jan. 1, 2003, and the benchmark Bovespa stock index jumped six-fold during the same period. The son of a former government minister and executive, Eike Fuhrken Batista is now probably Brazil's richest man.
``I think big, and I'm not afraid to take risks -- even if I'm alone,'' Batista says during an interview in his Rio office. ``I started out in the gold business. I know about risk and loss and having to build a business from scratch when nobody believes in you.''
Batista, who favors pink ties and dark suits and sprinkles his Portuguese with English phrases like ``a win-win situation,'' is reveling in the prospect of greater wealth. In January, he told the Sao Paulo newspaper O Estado de S. Paulo: ``I want to surpass Bill Gates in five years. Brazil has to be No. 1.''
Gates, the Microsoft Corp. co-founder, owned 813.6 million shares in the software giant as of a May 14 regulatory filing, giving him a stake valued at about $22.9 billion as of June 20. Batista's investments in mining, power, oil, real estate, logistics, entertainment and forestry give him an empire of roughly $17 billion.
In April, Batista netted $3.5 billion with the sale of mines to Anglo American, his third 10-figure payoff in two years from companies he built. He added 6.7 billion reais ($4.2 billion) to his fortune after selling shares in June in his new oil company, OGX Petroleo e Gas Participacoes SA, and he stands to gain at least $1 billion in a planned offering of his logistics business, LLX Logistica SA.
``He's the quintessential multitasker,'' says Gouvea, 33, corporate finance director at MMX, Batista's flagship publicly traded corporation. ``He is the only person I know who can have control of several deals at once and still be thinking about making money with really good ideas.''
Superstition helps too, Batista says. All of his company names -- EBX, MMX, OGX, LLX -- contain the letter ``x,'' for the multiplication of wealth in numerology, which holds that there is a mystical relationship between people's lives and letters and numbers. A golden sun logo, representing energy, wealth and optimism, according to Incan mythology, adorns the pink and gold flag of his yacht, the Pink Fleet, which ferries tourists around Rio's Guanabara Bay. The logo also shows up on his business cards and the china at his Rio restaurant, Mr. Lam.
Batista hasn't needed luck to attract foreign investors. Brazil's economy is growing fast -- 5.8 percent in the first quarter following a 6.2 percent pace in the fourth quarter of 2007 -- amid rising consumer spending and foreign investment. Standard & Poor's in April granted an investment-grade rating to Brazil's sovereign debt, and Fitch Ratings followed in May.
Strong domestic demand and easier credit will insulate the local economy against a global slowdown and sudden drops in commodity prices, says John Praveen, chief investment strategist at Newark, New Jersey-based Prudential International Investments Advisers LLC, which manages about $630 billion.
``These are the conditions creating that kind of wealth for Mr. Batista,'' Praveen says.
Batista says he is capitalizing on the nation's relative stability.
``I'm part of a new generation of entrepreneurs who can access capital markets, who don't have to go to the government for funding, who can take on a lot more risk and see business pay off,'' says the green-eyed Batista, who's divorced from Luma de Oliveira, a former model and queen of Rio de Janeiro's Carnival parades.
Company His Father Ran
Brazil's currency, the real, has almost doubled in value against the U.S. dollar during the past four years. Inflation has collapsed from almost 5,000 percent in 1994 to 5.58 percent in May.
The Bovespa's rise has been led by Cia. Vale do Rio Doce, which is the world's largest iron ore exporter and the company Batista's father ran, and Petroleo Brasileiro SA, the state-controlled oil company known as Petrobras. Last year, Petrobras announced the biggest discoveries of crude in the Western Hemisphere in the past three decades.
Relatively low interest rates fueled growth, too. During the two years ended on Sept. 30, 2007, Brazil's central bank lowered the benchmark Selic lending rate 18 times to a record low of 11.25 percent from 19.75 percent, the longest easing cycle since the rate was adopted in 1999. The rate is currently 12.25 percent.
Brazil became a net foreign creditor in January after international reserves surged to a record $171.6 billion, leaving behind its decades-old status of biggest debtor among emerging markets. Reserves reached $198 billion on May 30.
Luiz Inacio Lula da Silva, president since 2003, bolstered confidence by reducing the budget deficit and allowing the central bank to operate independently, Praveen says.
Batista isn't the only Brazilian billionaire riding the wave. Rubens Ometto, 58, controlling shareholder and CEO of Cosan SA Industria e Comercio, the world's biggest sugar cane processor, has increased the company's capacity 10-fold in the past two decades. In 2006, Andre Esteves, then 38, became Brazil's youngest self-made billionaire when he sold his Banco Pactual SA investment bank to Zurich- based UBS AG for $2.6 billion, plus a $500 million retention package for about 80 UBS and Pactual employees. Esteves ran UBS's Latin American business until June.
Some investors say the real has come too far too fast. Marcelo Carvalho, chief economist in Brazil for Morgan Stanley, predicts a 4.5 percent drop in the currency this year amid a surge in imports. In late May, Brazil's central bank forecast a current account shortfall of $1.5 billion for that month, down from a surplus of $3.31 billion in April.
Cancelled Share Offerings
Another hitch: Share offerings have been hit by a wave of cancellations. Twenty-seven companies postponed or withdrew initial public offerings this year through June 20, according to data compiled by Bloomberg. Investors abandoned the IPO market after the U.S. subprime crisis increased aversion to emerging-market assets.
Batista's appetite for risk -- and for oil -- is helping him buck the IPO trend. After plowing capital into gold mines in the 1980s and '90s and then into nickel, copper, iron ore and several nonmining businesses in subsequent years, Batista's new bet is offshore crude. The 6.7 billion reais that OGX raised in the June IPO will finance offshore oil development. The company, created last year, was valued at 35 billion reais after one of Brazil's biggest share sales.
Offshore Oil Fields
In a November auction for oil exploration rights, Batista spent $800 million for 21 offshore fields that hold potential reserves of 4.8 billion barrels, according to DeGolyer & MacNaughton, a Dallas-based petroleum appraisal firm.
The same month, Petrobras said the nearby Tupi oil field contained 5 billion-8 billion barrels of oil, the biggest find in the Americas since 1976. And in April, Brazil's oil regulator said the Carioca field, in the same vicinity, may contain as much as 33 billion barrels.
The announcements fueled share gains at Petrobras, which was the world's sixth-largest company as of June 20, surpassing Microsoft, Wal-Mart Stores Inc. and AT&T Inc.
``He is a guy that's not afraid of risks, and that in Brazil is truly rare,'' says Francisco Gros, vice chairman of the board of OGX and a former Petrobras CEO.
When OGX was created in September 2007 and failed to attract the $500 million planned for its startup, Batista took $370 million from his own pocket, Gros says. In mid-February, Batista donated his 30 percent stake in Brazilian and Chilean power plants -- valued at as much as $1 billion -- to minority shareholders in his power company, MPX Energia SA, to make up for losses since a December share sale.
Batista said in a Bloomberg interview on Feb. 20 that he wanted to reassure investors such as Boston-based Fidelity Latin America Fund that he believed in the projects. Gros says such moves give Batista credibility.
While he pursues commodities riches, Batista also has large construction projects on the drawing board. He said in September that he planned to raise at least $800 million by selling a stake in LLX to build two port complexes in Brazil. One north of Rio would ship iron ore, ethanol and general cargo. Another near Sao Paulo would be a container port.
The ports and other business pursuits have drawn the attention of regulators, and some say Batista cuts corners or breaks rules to get things done in a country known for bureaucratic red tape.
Fined Three Times
His MMX mining company has been fined three times since mid- 2007 for buying charcoal produced from wood in areas where logging was restricted, according to documents from Brazil's environmental agency, known as Ibama.
In 2007, the federal police, the national Labor Prosecutors' Office and Ibama discovered that MMX was buying charcoal from an Indian reservation to feed its pig-iron plant near Corumba, in the heart of Brazil's Pantanal region, says Ricardo Pinheiro Lima, Ibama's chief in Mato Grosso do Sul state.
The Pantanal is the world's largest freshwater wetlands, 10 times the size of Florida's Everglades, according to the Arlington, Virginia-based Nature Conservancy.
MMX was fined 1 million reais twice in 2007 and 3 million reais this year.
``Unfortunately, by law we cannot apply bigger fines, but we are watching what they are doing,'' Lima says. ``We are stopping truckloads of illegal charcoal from feeding MMX's plant, and that's already a victory.''
An appeal by MMX is pending. The company didn't know the charcoal was coming from an Indian reservation, MMX spokesman Alexandre Falcao says.
In March, state public defender Thiago Tozzi filed a civil suit in the northeastern state of Ceara that accuses MPX and the state's environmental agency, Semace, with failing to produce a proper environmental impact study for a 700-megawatt coal-fired power plant, court documents show.
``What the company called the study was a sales pitch for the project,'' Tozzi says. ``It showed how Batista completely disregards legislation and has no respect for Brazilian society.''
Gouvea says Batista follows the rules.
``You will always have people protesting, complaining,'' he says. ``That's not unusual.'' Gouvea says the billionaire's team receives permits quickly because it's simply more efficient. ``We have a 360-degree vision of projects, and we are prepared to handle the challenges,'' he says.
LLX is in a battle over Batista's port plan at Peruibe, on the coast of Sao Paulo state. Tupi-Guarani Indians there accuse logistics company employees of coercion and trying to bribe them into leaving the land LLX needs to build the $2.5 billion port. Three federal prosecutors filed a civil complaint on April 24 that seeks an order condemning LLX for acts aimed at taking possession of Indian land.
Brazil's National Indian Foundation, or Funai, is trying to get the government to confer Indian reservation status on the 2,840- hectare (7,000-acre) oceanfront property, called Piacaguera, says Cristiano Hutter, the foundation's chief in Peruibe. He says the foundation has accepted the Indians' claims that their ancestors lived on the land for centuries. Funai has sent the request to Brazil's Justice Ministry for approval.
No date has been set for a decision, and a federal judge has ruled that LLX can't start construction until the matter is resolved.
Batista says the Indians aren't originally from the area and only recently settled there for economic reasons. He wants to move them to a farm he plans to buy 30 kilometers (19 miles) from the coast.
Records Back to 1553
At Peruibe's history museums, photos of Tupi-Guarani huts on the Piacaguera land in 1942 illustrate a section of the exhibit called Native Roots. Funai says there are records of the Indians on the land that date as far back as 1553.
As the Indians tell it, Jose Salomao Fadlalah, LLX's development director, made false promises to induce them to leave the land. He's named in the prosecutors' complaint, which says Fadlalah hired Funai employees and Indians as consultants to try to deceive other Indians to pack up and leave.
``He told us we should just accept whatever they offered, that we had lost the land, and those who didn't accept the proposal would be left with nothing,'' says Miriam dos Santos as she breastfeeds her 1-month-old daughter, Camile.
Fadlalah says that LLX hired consultants but denies they were instructed to lie or bribe the Indians. ``We really believe that our proposal is very beneficial to the families,'' he says.
Fadlalah says that from an environmental and legal point of view, the project is ``completely viable.''
``The area is not an Indian reservation, and it's not land where Indians have traditionally lived,'' he says.
His Father's Stories
Batista had experience with mining's challenges from a young age. He was born in the mining state of Minas Gerais and grew up hearing stories about iron ore, railroads and ports from his father, Eliezer Batista da Silva. Now 84, his father was a civil engineer who started working at Vale in 1949 and became CEO in 1961. He was also Brazil's mines minister in 1962 and '63. Da Silva moved to Dusseldorf, Germany, in 1968, and later to Brussels, to expand Vale's international operations. He returned to Rio in 1979, serving as CEO until 1986. The state-owned company was privatized in 1997.
Batista says his father, now an MMX board member, wasn't at home for most of his childhood and that his disciplined German mother, who died in 2000, was a large influence. Batista moved with the family to Germany and at 18 enrolled at RWTH Aachen University, where he earned a degree in metallurgical engineering. He says he discovered an entrepreneurial talent while selling insurance policies in Aachen to supplement his student allowance.
Gold and Precious Stones
Back in Brazil in the early '80s, Batista joined a gold rush near the southern Amazon city of Alta Floresta. He worked as an intermediary in the gold and precious stones trade, finding buyers in Sao Paulo and Rio and keeping 5 percent of the deals as a fee.
``When I was 24, I bought my first gold mine,'' Batista told an audience of business leaders in Sao Paulo on April 28. ``The mine was so rich that it was almost idiotproof.''
Batista says he made $6 million in his first year. He says he dealt with wildcat gold panners in the jungle and once had a bodyguard shoot and kill a man who drew a gun during a money dispute.
Soon after, he decided to mechanize production. He lost a few million dollars in the process, as the mine was located in a remote area and accessible only by airplane. He says he underestimated the logistics.
``I made many mistakes,'' Batista told the business group. ``I lost money; I even had to buy an old DC-3 to transport equipment to the mine, but in the end I made it work.''
Two other gold mine ventures followed, both through partnerships.
``Looking for good-quality assets and attracting partners to help you add value to them is really exciting,'' Batista told the audience in Sao Paulo.
In the late '90s, after buying mining ventures in Brazil, Canada, Chile and Greece, and investing at home in a cosmetics company, a jeep maker and a courier service, Batista says he lost almost $500 million, and decided to settle for good in Brazil and dedicate his energy to iron ore. MMX was the first company created under Batista's EBX holding company. That year, 2005, iron ore prices averaged $32.63 per metric ton. By 2007, the price had jumped to $45.33 and rose 65 percent to $75 early this year. MMX's share price has soared almost sixfold to 59.75 reais on June 20 from 10 reais at the IPO in July 2006.
Batista's superstitious bent extends beyond company names. De Oliveira, his ex-wife, says he picked their sons' names -- Thor and Olin -- because they have four letters, which signifies strength in numerology. Batista's lucky number is 63. All of his bids in the oil licensing auction ended with 63 cents, and the contract with Anglo American was for a precise figure, down to 63 cents, a March 31 company filing shows.
'Believes in Luck'
``Eike believes in luck, in positive and negative energies,'' de Oliveira said in e-mailed responses to questions. ``He is superstitious like any Brazilian.''
Batista's personal life has been colorful, even by Brazilian standards. In 1991, he eloped with de Oliveira a week before his planned wedding to a socialite.
During the 13-year marriage, de Oliveira posed nude for male magazines, including Playboy. In 1999, Batista paid an undisclosed fee to Playboy after he persuaded de Oliveira to cancel a photo shoot, according to her brother and agent, Mem de Oliveira. Batista declined to comment.
``He first tried to make me gain weight, giving me chocolates, showing up at home with my favorite milkshake every day,'' she said in the e-mail.
$250 Million Divorce
In 2004, de Oliveira left Batista for a fireman, according to stories splashed on the covers of Brazil's main newspapers. She denies it and says the separation was consensual. She received $250 million in the divorce, according to the weekly newsmagazine Veja.
De Oliveira won't comment on the amount, saying only that Batista was always ``very generous.''
After the separation, Batista bought her a house a few meters from his own. He often spends time there with his sons, who are 16 and 12. The former couple still have a strong friendship, she says.
His current girlfriend is Flavia Sampaio, a 27-year-old lawyer who is also a model, according to Veja magazine. Batista declined to comment on his personal life.
What he doesn't spend on ports and similar big construction ventures, Batista pours into pet projects to beautify Rio, a city he says has the potential to become a true business capital even though it's riddled with crime and poverty. Rio is one of the world's most violent cities, where 6,113 people were murdered in 2007, according to data from the state's Security Secretariat.
'A Wonderful City'
``This is where I want to raise my children and grandchildren because it's truly a wonderful city,'' says Batista, who is fluent in German and speaks English with ease. ``My family and I use an armored car to go around, but I don't think it will be like this forever.''
Asked if he isn't afraid to wear his gold Rolex watch in Rio, Batista scoffs. ``We can't do things differently just because the city has a crime problem,'' he says. Batista isn't shy about telling the media that he owns a $26 million Embraer Legacy 600 business jet, a $19 million Pershing 115 luxury yacht and a $1.7 million speedboat whose engines have to be changed after each race. In the living room of his mansion in Rio's Jardim Botanico neighborhood, Batista has parked a Mercedes-Benz SLR McLaren. The latest model lists for about $500,000.
Flaunting his wealth might be fun for now. It may seem less sporting, though, should complaints from federal prosecutors and fearful Indians gain traction--or demand for Brazil's abundant resources take a fall. (Bloomberg)