Former Xstrata Plc Chief Executive Officer Mick Davis is studying making a bid for BHP Billiton Ltd. thermal coal and nickel assets after raising funds from investors including Abu Dhabi’s sovereign wealth fund, according to a person with knowledge of the matter.
Davis’s X2 Resources is weighing an offer for the BHP assets after raising as much as $3.75 billion from five investors last month, said the person, who asked not to be named as the information isn’t public.
There is no certainty that X2 will make an offer to BHP, and the world’s largest mining company hasn’t said it has identified any operations that it wishes to sell.
Davis has raised money to turn his fund into a mid-tier mining company, X2 said March 31. X2 said its five investors are Noble Group, Asia’s largest raw-materials trader, private-equity fund TPG Capital and sovereign-wealth and pension funds that it didn’t identify. The Abu Dhabi Investment Council, manager of the oil-rich sheikhdom’s cash, is among the investors, according to the person.
An official at the Abu Dhabi council, also known as ADIC, and spokesmen for London-based X2 and BHP declined to comment.
BHP said April 1 that it is studying simplifying its businesses to focus on iron ore, copper, coal and petroleum after a two-year campaign of global asset sales. The BHP operations outside of its core commodities, which include aluminum, bauxite, manganese and nickel, may be valued at $10.7 billion, BMO Capital Markets estimates. Including Melbourne-based BHP’s thermal coal operations takes the valuation to $20.6 billion, BMO said.
X2 is raising additional funds, and attracting a second set of investors who are making smaller contributions than the initial group of five backers, the person said. X2 already has arrangements with lenders to increase its available funds to more than $10 billion, including the main five investors contribution, to start making acquisitions, the person said.
X2 arranged $2.5 billion of committed funding and as much as $1.25 billion agreed to on a conditional basis, with each of the five initial investors providing equal amounts, it said in March.
The Sunday Times reported yesterday that X2 made an offer for BHP’s thermal coal unit and is considering acquiring its aluminum, nickel and manganese operations. It also reported that X2 recently appointed JPMorgan Chase & Co. to help raise as much as $8 billion in debt for acquisitions.
South African-born Davis, 56, is seeking to repeat his success at Xstrata, where he led the management team that transformed the company from a coal producer with a market value of $500 million into a $50 billion diversified giant during a decade of mergers, acquisitions and expansion. He left when Glencore International Plc completed a $29 billion all-share takeover of the company last year.