Who’s Who Legal interviews Joel Rennó Jr, director of corporate finance at EBX Holdings, a multi-sectoral corporate group that includes oil and gas, iron ore mining, logistics, coal mining and equipment companies. He discusses the legal marketplace and growth in the Brazilian economy.
Joel Rennó Jr
Position: Director of corporate finance
Company: EBX Holdings
Founded in the early 1980s by Brazilian business tycoon Eike Batista, EBX Group operates throughout Brazil, Colombia and Chile in business activities including mining, oil and gas, offshore, energy, infrastructure, logistics, real estate and more recently entertainment and sports. A multi-sectoral group with a particular focus on natural resources, the company has one mission: to seek opportunities and generate wealth in an integrated, sustainable and efficient manner.
The holding company has six companies listed on BM&F Bovespa’s Novo Mercado – a segment of the São Paulo stock market for companies committed to the very highest standards of corporate governance. The companies include OGX (oil and gas), MPX (energy), LLX (logistics), MMX (iron-ore mining), OSX (offshore services and equipment) and CCX (coal mining).
EBX Group’s activities have attracted a great deal of press attention. In March 2012, the group saw a $2 billion investment from Abu Dhabi investment fund Mubadala. In April, MPX entered into a joint venture with E.ON creating the largest private energy company in Brazil and announced a strategic agreement with IBM to outsource IT operations for 10 years and cooperate on research and development activities. In May, General Electric invested $300 million in the group’s holding company.
Between 2011 and 2012 alone the EBX Group will have invested $15.5 billion in the areas of infrastructure and natural resources. With Brazil to host the FIFA World Cup in 2014 and the Olympics in 2016 it is a race against the clock to ensure Brazil’s projects are completed in time. These projects range from the construction of hotels, ports and highways to rolling out its 4G network, and upgrading rail lines.
The group continues to diversify and look for new opportunities, and Batista’s latest foray into the world of entertainment and sports has seen him invest through IMX Live (jointly owned by EBX Group and IMG Worldwide) in Rock in Rio, a world-famous music festival.
Who’s Who Legal spoke to Joel Rennó Jr, director of corporate finance at EBX Holdings, who has actively participated in many of the recent investments and activities of the group.
Tell us about your role.
I am one of EBX Holding’s directors of corporate finance. Our team is focused on sourcing, structuring and developing strategic transactions to maximise profits for our founder and controlling shareholder as well as for all our partners and minority shareholders in our public companies. We work closely with the investor relations department as a way of continually enhancing our communication channels with the investment community.
Describe a typical day.
Work then meetings followed by more work and more meetings with video and conference calls in between.
Does the group have its own legal department? If so, how big?
EBX Holding has a legal department composed of seven to eight lawyers. It has its own general counsel, Flavio Godinho, and deputy general counsel, Luiz Figueiredo. The legal team is extremely sophisticated and business-oriented.
Tell us about any recent special projects your team has been working on. Which laws firms did you hire?
In the last year EBX has been very active. We have worked on significant minority investments in the EBX Holding Company by Mubadala, the Abu Dhabi investment fund for $2 billion and GE for $300 million. We have also worked on the joint venture between E.ON and MPX (our power generation company) and their $1 billion capital injection also in MPX.
The law firms we have used for these deals are Mattos Filho, Veiga Filho, Marrey Jr e Quiroga Advogados, Linklaters’ Brazil office and Davis Polk & Wardwell LLP.
We’re currently working with Sullivan & Cromwell LLP on a large cross-border M&A deal in Colombia.
With respect to financial advisers for M&A transactions, we normally turn to Itaú BBA, Credit Suisse and BTG Pactual. Recently we have also developed close ties with Morgan Stanley and Bradesco BBI.
Do you tend to use the same law firms?
Yes and no. We tend to use the same individuals regardless of the law firm in which they are working, although we always take into consideration the staffing within a given firm, especially for the more complex and time-consuming deals.
Is the legal marketplace very competitive? Is there a lot of choice for clients? How can firms distinguish themselves?
It is very competitive but there are only a few local firms that, in my personal opinion, can deliver. Those that come to mind first are Mattos Filho, Linklaters’ Brazil office, Veirano Advogados and Ulhoa Canto.
The Brazilian economy has been experiencing remarkable levels of growth in recent years. Have you seen a lot of foreign investment entering the country? Which sectors of the economy are growing fastest?
Foreign direct investment has dramatically increased, despite the recent slowdown shown by statistics. In my opinion, this has been caused in part by overly intrusive governmental intervention in some areas of the economy. Sectors which have been more positively impacted are of course oil and gas, natural resources and consumer/retail. The deal flow within our EBX Group is a clear demonstration of this trend (not to mention the fact that M&A activity usually increases during bearish markets).
With Brazil due to host the FIFA World Cup in 2014 and the Olympics in 2016, the government has being turning its attention to improving infrastructure around the country. What impact is this having upon the company? How is the government facilitating? Are you working to very tight deadlines?
Our group’s founder and controlling shareholder has a unique business mission: to de-bottleneck Brazil’s underdeveloped infrastructure in order to promote sustainable and long-term growth to the country, generating jobs, social wellbeing and of course wealth. One of the direct consequences of such a mission is enhancing Brazil’s capabilities to host the World Cup, the Olympics and any other major events. Our group has invested and is currently investing more than $15 billion in mega transformational projects in Brazil, such as the Açu and Sudeste’s SuperPorts.
What are the greatest challenges facing companies in the infrastructure and natural resources sector in Brazil?
The fairly complicated tax system (especially for foreign investors) and bureaucracy sometimes involved in day-to-day business activities.
Have there been any recent regulatory developments? How has this affected the company?
The biggest development is Brazil’s new competition law which came into effect at the end of May 2012. Our group posts annual gross revenues in excess of 1.5 billion reais and therefore any small acquisition we make will most likely be subject to CADE’s scrutiny which now operates on a more complex pre-merger notification system. We also have a very active proprietary trading desk and we must now pay extra attention to portfolio deals so that they do not fall within the parameters established by the new law. My understanding is that as a rule of thumb the new law will help decrease the number of filings, except for investment fund industry (private equity houses will definitely have to reassess their M&A and exit strategies, especially in the secondary market).
What makes Brazil a great place to work in?
Brazil is an emerging economy with a strong and active government, perfect demographics and enormous potential to keep a very steady growth rate. Brazil is no longer the country of the future – it’s the present’s.