Hindalco Industries, the AV Birla Group’s flagship company and India’s largest aluminium producer, will acquire US-based aluminium company Novelis for $6 bn. The deal envisages a payment of $44.93 per share, which is 16.5% more than its last closing prices to Novelis shareholders amounting to a total of $3.5 bn. In addition, Hindalco will take on its books Novelis’ debt of $2.4 billion. The acquisition would help Hindalco get access to large customers like Coca-Cola, Ford, General Motors, Eastman Kodak and Thyssenkrupp. The acquisition is expected to be completed by the second quarter of 2007. The Novelis board has recommended the offer to its shareholders, largely financial institutions. The Novelis management will remain unchanged after the acquisition.
Novelis was spun off from Alcan, Inc. to meet anti-trust concerns after acquiring France’s Pechiney SA for about $4 bn in February 2004. it controls 19% of the world’s flat-rolled aluminium production. It is also the global leader in recycling of aluminium cans. The company operates in 11 countries and has 12,500 employees.
To finance the deal, Hindalco will contribute $450 mn from its treasury operations, while a closely held group company, Essel Mining & Industries, will invest another $300 mn. UBS is the financial advisor to Hindalco for the acquisition.
Novelis has about $3.2 bn in debt and loans outstanding. In November 2006, it reported a loss of $102 mn, or $1.38 a share, in the third quarter. In 2005, the company had reported net sales of $8.4 bn but incurred a loss due to contractual obligations. It is expected to turn profitable in 2010.
Read the article in Business Standard.
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