E.ON SE and EBX, its Brazilian partner, have agreed (3 April) on an increase in E.ON’s stake in EBX subsidiary MPX. In April 2012 E.ON acquired a 10% stake in MPX, EBX Group’s energy arm which is controlled by billionaire businessman Eike Batista. E.ON and EBX have now agreed to ‘strengthen their strategic partnership to support MPX to become the largest private energy company in Brazil.’
In reality this is a rescue package for MTX, and something of a gamble for E.ON, The move is based in part on expectations around MTX’s existing 10 GW pipeline of projects.
E.ON bought its stake in MPX from Batista for about €350 million ($455 million), in April 2012, as an investment in a company well placed to satisfy demand in an expanding and energy hungry economy. But in February Batista surprised E.ON with the news that he and his group of companies were in financial trouble . E.ON had to decide whether to pull out, and lose its substantial stake in the company if it went under, or support the company with a cash injection. It has decided on the latter.
In the first stage E.ON will acquire 24.5 % of MPX from EBX for a minimum price of R$10.00 per share plus up to a further R$ 1 per share depending upon the final settlement price of a planned capital increase and the share price performance of MPX in the six months following the closing of the transaction. In this first stage, E.ON will make an investment of up to €0.6bn.
In the second stage, MPX will make a capital increase of R$1.2bn (€0.5bn). E.ON has undertaken to subscribe for a 30.6 % share of the capital increase. Finally, the existing MPX-E.ON 50:50 joint venture company will be integrated into MPX. This will lead to an increase of E.ON’s stake in MPX to around 36.1 per cent as E.ON will receive shares in MPX equivalent to the value of its stake in the Joint Venture.
E.ON’s total investment will total R$1.9bn (€0.8bn). In addition, EBX and E.ON will enter into an agreement under which they will exercise their voting rights in MPX on an equal basis enabling them together to manage and develop the company. E.ON will also have an equal participation in the day to day management of MPX and will be entitled to increase its representation on MPX’s board of directors.
E.ON and MPX expect to close the first step of the transaction by the end of April 2013 after the respective antitrust approval. The capital increase is expected to take place during the summer.