Bloomberg News

Xstrata’s Davis Unlikely to Give Up Helm of Mine Giant He Built

February 09, 2012

Feb. 3 (Bloomberg) -- For Mick Davis, the 53-year-old South African who runs Xstrata Plc, the approach from commodities trader Glencore International Plc is unlikely to prompt him to surrender the helm of the mining company he built through a decade of dealmaking.

“The legacy is building one of the premier, largest metals and mining companies in the world, and having done so in a versatile manner,” said Jeff Largey, a mining analyst at Macquarie Group Ltd. in London.

Glencore, which already holds 34 percent of Zug, Switzerland-based Xstrata, made an approach regarding an all- share “merger of equals,” Xstrata said yesterday. The combined company may be valued at about 56 billion pounds ($89 billion) after excluding Glencore’s 12.6 billion-pound stake in Xstrata. Glencore has until March 1 to make a formal offer.

Davis’s rival for the role of running a combined company would be Ivan Glasenberg, 55, a fellow South African and former coal trader who led Baar, Switzerland-based Glencore to its $10 billion initial public offering in London in May. A Glencore spokesman declined to comment on the CEO position.

Davis may win the CEO job, people familiar with the situation said yesterday. The companies are discussing an equal share of board representation and top executive slots, one of the people said.

“Mick Davis becoming the CEO of the combined entity makes sense,” said Charles Cooper, an analyst at Oriel Securities in London, who has covered resources for 15 years. “I don’t think he’s ready to retire. Xstrata management would want to have an upper hand in the new company.”

Davis wasn’t available to be interviewed for this story.

Debt in 2001

When Davis joined Xstrata in 2001, it had a market value of about $500 million and about the same level of debt, he told a Melbourne Mining Club speech in London eight years later. Within two months of his arrival, Xstrata had to seek a waiver from banks on its debt covenants.

Xstrata is now the world’s biggest exporter of coal burned by power stations and the fourth-largest producer of copper, with 2010 sales of $30.5 billion. Under Davis, it has gone from having a staff of fewer than 2,500 to one with a workforce exceeding 70,000 in 20 countries.

“He’s very associated with it,” said Michael Rawlinson, a former JPMorgan Chase & Co. investment banker who is now a mining analyst at Liberum Capital Ltd. in London. When shareholders back Xstrata, “they are kind of backing Mick too, to the extent that an Xstrata without Mick is less valid.”

Youngest Umpire

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 left in 1986 to join Eskom Holdings SOC Ltd., Africa’s largest power supplier, as executive director.

In 1994, Davis was hired as finance director of South African miner Gencor Ltd. after “narrowly losing out on the appointment as CEO” of Eskom, according to former Gencor Chairman Brian Gilbertson. The two men turned Gencor into what became Billiton Plc.

Billiton moved its headquarters to London in 1997 and the following year acquired nickel producer QNI Ltd. and South Africa’s Ingwe Coal Corp. In 2001, Billiton was bought by Melbourne-based BHP Ltd., and Davis left to join Xstrata.

Oriel’s Cooper said Davis is “one of the strongest characters” in mining. “He is the kind of person who can cope with the Glencore board and the entrepreneurial character of the company.”

Vale Failure

Xstrata sold shares to investors in London in 2002. It bought Australian copper and zinc producer M.I.M. Holdings Ltd. in 2003 for A$5.13 billion ($5.49 billion) including debt. Three years later, it bought Canadian nickel producer Falconbridge Ltd. for $18 billion.

“He has created one of the major diversified mining companies, at first through M&A, which required real insight and real conviction,” Macquarie’s Largey said.

Davis has also experienced failures along the way. In March 2008, Vale SA, the world’s largest iron-ore producer, broke off talks to acquire Xstrata for cash and shares, blaming opposition from Glencore, the target’s main shareholder.

Xstrata abandoned a hostile bid for platinum producer Lonmin Plc in October 2008 after metal prices plunged, and it was forced to drop a proposed merger with Anglo American Plc in 2009 after a rejection from Anglo’s board.

Away from Xstrata, a key interest for Davis is the United Jewish Israel Appeal. He is chairman of the London-based charity, which aims to help guarantee a sustainable and positive future for the people of the Galil in northern Israel and the Jewish community of the U.K.

Davis lives in Hampstead, in London, and is married with three children.

--With assistance from John Viljoen in London. Editors: Todd White, Simon Casey

To contact the reporters on this story: Firat Kayakiran in London at fkayakiran@bloomberg.net; Jesse Riseborough in London at jriseborough@bloomberg.net

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net; John Viljoen at jviljoen@bloomberg.net


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