Private equity firm TPG and commodities trading house Noble have invested $500m each in X2 Resources, which aims “to create a new mid-tier diversified mining and metals group by…identifying and acquiring assets and businesses at an opportune time in the cycle”.
Noble will be X2’s preferred marketer and provider of supply chain management and logistics services.
South African-born Davis left Xstrata with a £15m payout at the time of its mega-merger with commodities trader Glencore in May.
An array of his ex-Xstrata colleagues form the executive team at X2, including former finance chief Trevor Reid and Andrew Latham, previously head of group business development.
It was not revealed how much money management had invested in the venture, or how large a stake they would own.
X2 is currently in talks with other investors, who are believed to be private equity and sovereign wealth funds. It is thought that X2 is looking to raise around $3bn-$5bn in total, with its first deal likely to be early next year.
Private equity is increasingly showing interest in the resources sector. Riverstone Holdings confirmed last week that it plans to float a new energy investment vehicle.
Investors will be hoping to snap up distressed mining assets for a good price during the lull in the commodities boom, but industry sources have warned that large firms will not necessarily want to sell off their assets at any price. Rio Tinto took its diamond unit off the block earlier this year after a lack of suitable offers.
ADVISERS X2 RESOURCES
GOLDMAN Sachs is advising X2 on the deal, with Brett Olsher, Christos Tomaras and Stephen Whitnell as key members of the team.
Olsher previously worked at Deutsche Bank, which was a regular adviser to Xstrata over the years. Olsher has worked on a large number of transactions across the mining, industrial and energy sectors, including the Glencore Xstrata merger itself, Xstrata’s £12.6bn acquisition of Ontario-based resources company Falconbridge and Mittal Steel’s £21bn takeover of European steel maker Arcelor in 2006.
A notable absence from the advisers panel is JP Morgan, who traditionally advised Mick Davis on deals during his tenure at Xstrata. Ian Hannam – dubbed the king of M&A resources during his stint at JP Morgan – used to lead the JP Morgan team on Davis deals before his resignation last year. He is currently appealing a £450,000 fine for market abuse from the City watchdog, and is now part of his own start-up, Strand Partners.
An industry source suggested that Davis is unlikely to sever contact completely with his old JP Morgan buddies, who know how a Davis venture works inside out: “Not everyone knows how to run a private equity fund, although everyone knows how to spend the money”.