Which banker’s services are worth $1 billion
Apparently, those of Andre Esteves are. When Eike Batista, fellow Brazilian billionaire, said he was seeking financial and strategic advice from Mr. Esteves, the BTG Pactual boss, for his oil empire, investors initially lifted the market value of the six listed and intertwined arms by $1.3 billion. The expectations may be too high.
Mr. Esteves, a trading whiz, has forged a formidable reputation for value enhancement. After agreeing to sell his bank to UBS in 2006 for about $3.1 billion, he bought it back from the Swiss group a few years later for less. A year ago, he took BTG Pactual public at a value of more than $14 billion.
Reviving Mr. Batista’s struggling EBX group will put Mr. Esteves’s skills to a big test. Last week’s gains, which followed some $28 billion of market value destruction ina year, occurred without investors even knowing exactly what Mr. Esteves would be doing for Mr. Batista beyond providing access to an unspecified amount of credit and co-presiding over a weekly strategy meeting.
Management shakeups have been the game plan so far. Mr. Batista has fired five chief executives in less than a year. And at OGX, the flagship oil company where production targets have been slashed, the chief financial officer and exploration boss were fired, too.
Mr. Batista, who has lost the title of Brazil’s richest man, obviously needs more ideas. Output at OGX is just a quarter of what had been expected. Mr. Batista is also facing delays and cost overruns with port projects and shipbuilding. The country’s fortunes haven’t helped. Brazil’s G.D.P. growth rate slumped to 0.9 percent in 2012 from 7.5 percent in 2010.
Investors may be anticipating fresh capital or additional financing. BTG Pactual is providing EBX with a $1 billion line of credit, according to Bloombe! rg. Even so, it could be a challenge, even for a proven salesman like Mr. Esteves, to raise new money given recent experiences. Mubadala, the Abu Dhabi state investment fund, bought a $2 billion stake in the unlisted EBX holding company a year ago.
The X in Mr. Batista’s corporate names is supposed to represent multiplication of wealth. It’s just not clear yet given all the operational and cash needs throughout EBX that even Mr. Esteves can make the math work.
Christopher Swann is a columnist and Jeffrey Goldfarb is an assistant editor at Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.
