E.ON expands its market position in Brazil through an increase of its stake in MPX to 36.1 per cent
Strengthening of partnership with Eike Batista to successfully develop the 10 GW project pipeline
E.ON SE and EBX, its Brazilian partner, have today agreed on the increase of E.ON’s stake in MPX. In April 2012 E.ON acquired an 11.7 per cent stake in MPX, EBX Group’s energy arm controlled by 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 and enhance their commitment to deliver affordable, reliable and efficient energy to Brazilian customers.
In the first step, E.ON will acquire 24.5 per cent 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. The agreed minimum price is in line with the volume weighted average share price of MPX over the past two months. In this first step, E.ON will make an investment of up to R$1.6bn (€0.6bn1).
In the second step, MPX will make a capital increase of R$1.2bn (€0.5bn1). E.ON undertook to subscribe for a 30.6 per cent share of the capital increase at a minimum price of R$10.00 per share. E.ON’s investment in the capital increase will be R$0.4bn2 (€0.1bn1). The Brazilian investment bank BTG Pactual has been retained by MPX as a global bookrunner for the public offering with firm underwriting commitment at the same price of R$ 10.00 per share for the remaining shares not subscribed by E.ON.
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 investment as a result of these steps will total up to R$1.9bn (€0.8bn1). 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. The integration of the Joint Venture into MPX will simplify MPX’s governance and operating structures.
E.ON CEO Johannes Teyssen said of the deal: “Today’s announcement is a confirmation of E.ON’s strategic belief in the growth opportunities the Brazilian market offers with its positive outlook on long term power demand and economic growth prospects. The transaction and subsequent JV reintegration increase our exposure to the fundamentally attractive Brazilian power market at a fair market value. This move will also accelerate the earnings flow to E.ON and will put MPX on a sound financial footing to fully exploit the extensive, high-quality project pipeline. From our experience of working together over the past year with MPX we have learnt that the combination of their local expertise and access to natural resources with E.ON’s global scale and capabilities will create significant value enhancement for both, MPX and E.ON. Increasing our stake to become a partner on eye-level and our active participation in the day-to-day management creates clear and distinct structures in MPX which will make us even more effective and powerful. We are happy that we were offered this unique opportunity to grow further in one of the world’s fastest growing power markets whilst keeping the expertise and skills of Eike and his team.”
MPX controlling shareholder Eike Batista commented on the transaction: “MPX begins today yet a new phase, in which E.ON will play a central role. Our agreement reflects not only the substantial value of MPX’s portfolio but also the company’s proven origination capabilities. We strongly believe that the company’s assets are strategic to the growth and reliability of Brazil’s energy supply. As our partnership is strengthened, E.ON will now have a fundamental role in the management of MPX and, consequently, the development and operation of its projects. By the end of 2013, MPX will have over 2,800 MW in operation or 15 percent of the thermal capacity of the Brazilian system. With additional 10,000 MW in thermo and renewable greenfield projects licensed, MPX is set to become one of the largest private energy firms in Brazil. Together, EBX and E.ON are ready to work towards building the generation capacity Brazil needs.”
MPX third biggest shareholder and biggest lender, the Brazilian state development bank BNDES said of the deal: “In relation to the material fact announcement by MPX we understand the transaction will be positive for MPX, strengthening its capital structure and reinforcing its growth strategy. BNDES will analyse participating in the public capital increase offering, upon its launch, in accordance with regulations.”
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.
1 FX BRL to EURO 2.55
2 Assuming R$ 10.00/ share