Eike Batista: Can the Brazilian Tycoon Revive his Crumbling Empire?

            
 
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Case Details:

Case Code : FINC090
Case Length :17 pages
Period : 2003-2013
Pub. Date : 2013
Teaching Note : Available (7 Pages)
Organization :EBX Group, OGX
Industry : Petroleum, Infrastructure, Mining
Countries : Brazil

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As of March 2012, Eike Batista (Batista), Chairman of the Brazil-based business conglomerate EBX Group (EBX) , was one of the richest persons in the world with a fortune of US$ 34.5 billion. The flagship company of EBX was oil and gas company OGX Petroleo e Gas SA (OGX), which accounted for more than half of Batista's wealth. There were five other listed companies in the group dealing with natural resources, commodities, energy, and logistics. Between 2006 and 2010, Batista raised billions of dollars through equity and debt to fund his companies in capital intensive industries.

But in June 2012, trouble reared its ugly head in Batista's empire. OGX announced that output targets would be lower than expected. The beginning of 2013 saw the problems grow more pronounced. With OGX missing its production targets, its share value went down . The share prices of all the other group companies followed suit as they were all interdependent. With Batista being a major shareholder, his personal wealth also continued to plunge. His net worth, according to Forbes, fell to US$ 10.6 billion by March 2013 and he dropped to the 99th position on the Forbes' list of ‘The World's Billionaires', 2013.

In July 2013, OGX announced that it would stop production in one of its important oilfields, Tubarão Azul, and that it had suspended drilling in the some other fields too as it was proving unviable. The announcement sent OGX stock plummeting by 29%. Forbes reported that Batista's net worth could be around US$ 1 billion as of July 2013.........

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