The Complete Story Of How Brazilian Tycoon Eike Batista Lost 99% Of His $34.5 Billion Fortune
Batista was born in Brazil in 1956 and moved
to Germany when he was a teen.
Eduardo P
Governador Valadares Square, in São Vicente de Minas downtown, Minas Gerais, Brazil
One of seven children, Eike was born in 1956 in Governador Valadares, Minas Gerais, Brazil, to a Brazilian father and German mother, he spent his childhood in the country of his birth, but moved to Germany when he was a teenager.
In 1974, he began to study metallurgical engineering at the University of Aachen in Germany.
Baci Cafe & Wine Bar
His family returned to Brazil when he was 18, and he started selling insurance to make ends meet. All his friends, on the other hand, were rich.
From the Australian Financial Review:
"So I got highly motivated to make some extra money and I sold insurance policies from door to door. It's a great learning experience because some doors open and some don't. I had a lot of teas with old ladies."
But by 1979, he'd dropped out of college before he could finish his degree in metallurgical engineering and returned to Brazil.
After school, he tried to export granite, marble and diamonds.
He told the Australian Financial Review:
"I discovered it was controlled by the Italian Mafia, so I quit that and began organizing pick and shovel miners to produce diamonds."
The garimpeiros (shovel miners) would come to his Rio office with diamonds in little bags. Batista introduced them to Jewish dealers from Portugal and Antwerp and collected commissions on each sale.
But eventually moved on to trading gold,
where he made his first millions.
In the early 1980's Batista returned to Brazil and started a gold trading firm Autram Aurem, raising seed money from connections in Rio and quickly establishing a far-flung network of 60 buyers of raw gold in the Amazon.
From The Age:
"The price of gold was shooting up and the cruzeiro [Brazil's currency before the real] was going down," recalls Willie McLucas, a former manager of a European resource fund that invested in TVX in the 1980s.
He eventually founded TVX Gold, a gold
mining company.
Youtube
Since the whole gold trading things was working out so well, Batista decided to found his own gold mining company—TVX Gold, in 1980.
The 'X' in the name is supposed to signify 'multiplication,' as in multiplication of wealth.
It was rough going. Once, his bodyguard
killed and buried a man in the Amazon
From Australian Financial Review:
Batista was a gold trader at the time, traveling around the pick and shovel miners (garimpeiros) in the Amazon jungle to buy their gold. He also financed some of them and one digger had made no attempt to repay him for six months.
"On one of my tours I went to see him and said: 'Where is my money?' He went screaming mad. He was a drunk. I made the mistake of calling him a son of a b--ch (filho da puta). I turned around and walked a few metres away and bang! He shot me in the back."
"He was drunk. I was lying on the floor and the other guys' [his bodyguards] instinctive reaction was to shoot him because they didn't know whether he would shoot them next."
They buried the garimpeiro in an unmarked grave at the end of the airstrip.
And some say Batista wasn't always on the
straight and narrow in his dealings.
From the Age:
"Eike would go into the jungle and show these village chiefs a 10-day-old newspaper and say, 'Look, here's the price of gold,'" McLucas, told The Age.
"Meanwhile, the price had gone up, and would go up even more by the time he got back to Rio. He'd pay the chiefs in local currency, which was dropping, and sell the gold in hard currency. You couldn't lose."
In 1983 founded EBX, the umbrella under
which he would found all his other companies.
Between 2004 and 2012 he would add six public companies under the EBX umbrella:
- OGX (oil), MPX (energy),
- LLX (logistics),
- MMX (mining),
- OSX (offshore industry),
- and CCX (coal mining).
He became a superstar in 1991 when he
eloped with model, actress and carnival dancer
Luma de Oliveira IN 1991.
Flickr
Luma de Oliveira
The couple met in 1990 and at the height of their romance, they were the darlings of gossip rags and the mainstream media.
The thing was, Batista was seeing a Brazilian socialite at the time they were married (because Oliveira was pregnant) unbeknownst to Oliveira.
In the four years before they got divorced, they had two children—Thor and Olin.
Meanwhile, Batista started really living
like a billionaire — he won several power boating
championship titles.
In the 1990's Batista was the Brazilian, U.S. and world champion in the Super Offshore Powerboat class.
In 2006, he covered the 220 nautical miles between Santos and Rio de Janeiro in just a sliver over three hours and beat the record for the course in his boat, the Spirit of Brazil, according to a Dow Jones profile of the CEO.
He bought lots of really expensive things.
Pink Fleet Yacht
Things like this yacht.
Really, just a whole bunch of expensive stuff.
Spirit of Brazil VIII yacht
Like this other yacht.
...and this private jet...
Embraer Legacy 600 jet
...also, this private jet...
Embraer Phenom 300 jet
...and this one.
Gulfstream 550 jet
So far the tally is: two yachts and one private jet.
And this really expensive car.
He bought a $1.2 million Mercedes-Benz SLR McLaren. Then he used it to decorate the lounge of the Jardim Botanico mansion in Rio.
And he sure could afford it. At the start of 2012, he was worth more than $30 billion.
In 2001, he had to resign from TVX, his gold
mining company
After plans for a gold mine in Greece went bust because of political opposition, once high-flier TVX took a decided turn for the worse. And then the price of gold started to fall, reaching a paltry $300 an ounce.
Batista resigned in 2001, after the cash-strapped producer was forced to put itself up for sale.
Environmental groups started agitating about
what his businesses were doing to the environment.
You don't want to mess with Greenpeace or anyone else who is concerned with the health of Amazon River dolphins near Batista's mining operations.
But 10 years later, Batista bought back into
the gold business.
In 2011, Batista bought out Ventana Gold Corp., a company he's had his eye on for a while by then. He first snapped up a 9.5% stake in Ventana in July 2009 through EBX, and by 2010, he controlled 20% of the company's stock.
They finally came to a full sale agreement in 2011, when Batista sweetened the deal, which valued Ventana at a little more than C$1.5 million.
And one of his companies bought the rights
to the Ultimate Fighting Championship in Brazil.
Flickr
Ultimate Fighting Championship (UFC) fighter Keith Jardine demonstrates grappling moves during an exhibition in the hangar bay.
IMX, Batista's sports and entertainment company, bought the rights to the Ultimate Fighting Championship (UFC) in Brazil in late 2011. UFC Brazil is a mixed-martial arts fighting competition hosted in Sao Paulo that's aired on pay-per-view television.
In the spring of 2012 he was the 10th richest
man in the world.
AP
Eike Batista
And he told Bloomberg he absolutely had to number 1 because of the competitive spirit that he acquired in his childhood:
"I suffered very heavy asthma, so my mother threw me in the cold swimming pool," he said. "So I cured my asthma through discipline, and I saw that you could achieve things by performing, and it's part of my DNA… I'm very competitive."
Batista also said he wanted to repair Brazil's reputation:
"Brazil lost two generation of Brazilians to the crisis between '84 and '97," he said. "Brazil probably paid $150 billion in extra risk spread [during that time]. The ratings agencies put Brazil in the same level as Nigeria, and today it's better than Germany."
By the end of 2012, however, he lost two-thirds
of his fortune and needed cash.
BloombergTV
His oil and mining companies started hemorrhaging money in 2012. OGX, the oil company, had lost 40% of it's value halfway through 2012, as it had to cut production targets at it's first two oil wells by as much as 75%.
And the mining company, MMX, got slapped with a $1.8 billion way-past-due tax bill.
He started off 2012 with more than $30 billion. By the end of the year, his net worth was down to about $12.4 billion.
Batista struck a deal with a sovereign fund
in Abu Dhabi to get his hands on some extra cash.
Wikimedia Commons
In 2012, he got Abu Dhabi’s Mubadala Development Company, a government owned fund, to invest $2 billion in EBX Group Co., which gave the fund a 5.63% economic stake in the company.
He was raising money to develop his oil and mining businesses.
But if he doesn't deliver a 5% annual return
on Abu Dhabi's investment, he has to turn
over more of the company by 2019.
The amount that Batista would have to turn over is unknown, what is known is that he's taking on more risk.
But he's probably okay with that.
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