IPO VIEW-Brazilian billionaire’s IPO is bet on oil growth

* Oil, drybulk IPOs a play on recovery-analyst

* Brazil’s OSX IPO one of largest in world

* OSX to do business with Batista’s OGX

By Elzio Barreto and Clare Baldwin

SAO PAULO/NEW YORK, March 12 (BestGrowthStock) – OSX Brasil
(OSXB3.SA: ), a Brazilian shipbuilding and oil services company
owned by billionaire Eike Batista, doesn’t look like much on
paper.

It owns one ship, the OSX1, which will be leased to another
of Batista’s companies, plus land in southern Brazil where it
plans to build a shipyard. OSX, which posted a 33.4 million
reais loss last year, also owes 750 million reais of debt.

Yet if all goes as planned, OSX’s initial public offering,
scheduled for next week, could raise up to 9.92 billion reais
($5.6 billion) in the second-biggest ever IPO in Brazil, and
one of the largest in the world over the past year.

“Like other of Eike’s investments people are buying into
the ability of Eike to build a business and finance a business
that doesn’t exist today,” said Scott Cutler, head of listings
at NYSE Euronext.

Cutler, who just returned from a trip to Brazil to meet
with potential IPO candidates, said interest in Latin America’s
largest economy remains strong.

Batista, who made the biggest jump in the Forbes list of
billionaires and ranks as the world’s eighth-richest person,
made most of his wealth through the IPOs of his mining, oil,
energy and logistics companies. [ID:nN11222350].

OSX Brasil is the latest and most audacious IPO yet hoping
to benefit from investor bets on a global economic recovery.

Rising oil prices and soaring Chinese demand for
commodities like iron ore and coal have triggered interest in a
flotilla of ship-related IPOs in the Americas.

In the United States this week, two shipping companies —
dry bulk carrier Baltic Trading Ltd (BALT.N: ) and crude and fuel
oil carrier Crude Carriers Corp (CRU.N: ) — bet on increasing
demand for basic goods and went public. A third company, oil
and dry bulk carrier Alma Maritime Ltd (AAM.N: ), also filed for
an IPO.

“I think it shows that investors are clearly focused on the
global recovery. Another thing I think they’re thinking about
in terms of maritime transportation is that they’re viewing
this as a solid entry point to a sector that is at the bottom
of its cycle,” said Credit Suisse analyst Gregory Lewis.

FINDING A NICHE

The marine transport industry is growing across the
container, bulk and oil sectors. But a potential surplus in
shipping capacity remains a key factor in determining the pace
and strength of the recovery.[ID:nLDE6291AO]

Analysts forecast increased demand for dry bulk goods like
iron ore from China and say oil prices should also trend
upward.

There is space for new companies in the maritime transport
sector, Connecticut-based Renaissance Capital analyst Matt
Therian said.

“If you’re bullish on the sector, your alternative is going
out and buying an existing company, which might have a lot of
expensive legacy debt, or coming into a new vehicle,” said
Therian. “(Baltic and Crude Carriers) don’t have any debt to
pay down so they can go after the spot market.”

OSX has also carved out a niche. It is looking to benefit
from an expected surge in demand for oil platforms, ships and
services from OGX Petroleo e Gas Participacoes (OGXP3.SA: ), also
controlled by Batista, state-run Petrobras (PETR4.SA: ) (PBR.N: )
and others seeking to tap Brazil’s vast deep-water oil wealth.

MADE IN BRAZIL

Brazil-based companies that win energy exploration
concessions are obliged to source about 70 percent of their
equipment and services domestically, Therian said. The
requirement is to shield Brazil’s companies from more
competitive shipping yards in Asia, he said.

OSX will price in Brazil on March 17 and begin trading on
the Sao Paulo stock exchange on March 19.

The company plans to sell 5.51 million common shares,
equivalent to a 40.4 percent stake, at a price range of 1,000
reais to 1,333.33 reais. The offering might increase by 1.93
million shares if underwriters, led by Credit Suisse, exercise
their option to sell additional stock to meet demand, valuing
the IPO at as much as 9.92 billion reais.

Despite Batista’s Midas touch reputation, OSX has no
revenue. It has signed an agreement to lease the OSX1 vessel to
Batista’s oil company OGX and expects to lease another 47 units
to the company over the next 10 years.

Investment Analysis

(Reporting by Clare Baldwin in New York and Elzio Barreto in
Sao Paulo; Additional reporting by Jonathan Saul in London,
Alison Leung in Hong Kong and Robert Gibbons in New York;
Editing by Gary Hill)

IPO VIEW-Brazilian billionaire’s IPO is bet on oil growth