(Bloomberg) — Mick Davis, who built Xstrata Plc into one of the world’s biggest mining companies, is trying to do it again.
Davis, a 56-year-old South African former cricket umpire, is considering a bid for the nickel business of Vale SA, the world’s top producer of the metal, according to people with knowledge of the situation. Davis’s investment vehicle X2 Resources values Vale’s nickel business at $5 billion to $7 billion, said two of the people, who asked not to be identified because the negotiations are private.
Through a decade of 40 mergers and expansions, Davis increased Xstrata’s market value more than 80 times, to $50 billion, while the company became the world’s biggest exporter of power-station coal. After it agreed to be acquired in 2012 by Glencore International Plc in a $30 billion deal, Davis was to lead the combined company. The power-sharing agreement collapsed when Glencore Chief Executive Officer Ivan Glasenberg demanded the title.
Davis’s X2 has since raised about $4.8 billion from equity investors and has been hunting for assets to buy from the world’s largest miners such as Vale, BHP Billiton Ltd. and Anglo American Plc.
“Mick always does things in a big way and I think he really wants to prove to the world that Xstrata wasn’t a fluke, that he can do this all over again,” said Ken Hoffman, an analyst at Bloomberg Intelligence.
X2 declined to comment on the potential bid. Rio-based Vale said it hasn’t received any proposal or held talks with X2 about its nickel assets. Vale has already said it may try to raise cash by selling some of its assets.
Billiton Role
A successful deal for the Vale assets could mean a return not only for Davis but also for more private-equity investments in mining, according to Hoffman. While buyout funds are flush with capital, they’ve struggled to land deals as commodity prices declined.
“If he comes out and does a great deal, I think it’s good for all the rest of these guys,” Hoffman said.
Davis grew up in South Africa’s Eastern Cape, where he became the country’s youngest qualified cricket umpire. He graduated with a bachelor’s degree from Rhodes University, before becoming an accountant.
He landed at South African miner Gencor Ltd. in 1994, helping to turn it into what became Billiton Plc. Davis left to join Xstrata in 2001 when Billiton was bought by BHP Ltd.
Falconbridge Deal
At Xstrata, Davis created a diversified mining company, riding a boom in metals prices as Chinese economic growth fueled what became known as the commodities supercycle. He completed deals with a total value of $33.6 billion. The biggest takeover was its $18 billion acquisition of Falconbridge Ltd. in Canada, the largest successful hostile bid ever in mining, according to data compiled by Bloomberg.
By the time Glencore made its bid, Xstrata had sales of $33.9 billion in 2011 and more than 70,000 employees in 20 countries, compared with fewer than 2,500 when Davis joined.
He was set to become CEO of the combined Glencore-Xstrata company until Glasenberg raised his bid and demanded that he lead the company. Davis was paid 4.63 million pounds ($7 million) after terminating the agreement.
Davis’s financial backers include Asia’s largest raw- materials trader Noble Group Ltd., private-equity fund TPG Capital and sovereign-wealth and pension funds.
Should X2 make an offer, it won’t be the first time Davis has targeted major nickel assets. Falconbridge was one of the world’s largest producer of the metal when it was acquired in 2006.
Falconbridge’s big Canadian rival at the time was Inco Ltd., the nickel producer that Vale bought for $18.2 billion in 2007. Eight years later, Davis is considering a bid for the former Inco assets. – BLOOMBERG
