Final hindalc


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  • 75,415,536 , 47.735 dollar per share
  • From 4 percent to 45percent relative increase in market share over NasCo
  • Final hindalc

    1. 1. Merger & Acquisition (Hindalco & Novelis)
    2. 2. INTRODUCTION To Company
    3. 3. 42% 63% 44% 31% Primary Aluminium Rolled Products Foils Wheels
    4. 4. • Global brand image. • Cost effective producer. • Sound financial position. • A high degree quality consciousness is the core competence of the company, ISO 9001 and ISO 14001 have added more prestige to the company. • Company has a well-established distribution network, covering a geographically wide and scattered market. 5 STRENGTH
    5. 5. • Present production capacity is not adequate to meet the rising high demand. • Technology is not upgraded to mark as compare to global giants in aluminium industry. 6 WEAKNESS •R & D collabratation with universities and another research organization. •More emphasis on downstream production of value added products. •Recycling should be adopted as routine production. •Raising more finance from marketing for more acquisition and merger. OPPORTUNITY
    6. 6. • Innovative revolution in plastic and steel industry. • Reduce in Exide duty. • Fall in price of Al. In neighbour country. 7 THREATS
    7. 7. Canada based company formed in early 2005 as a result of a ‘forced’ spin-off from its parent, the $ 23.6-billion aluminium giant and Canada-based Alcan Inc. Novelis is the world leader in aluminium rolling, producing an estimated 19 percent of the world's flat-rolled aluminium products. The company is No. 1 rolled products producer in Europe, South America and Asia, and the No. 2 producer in North America.
    8. 8. With industry-leading assets and technology, the company produced the highest-quality aluminium sheet and foil products for customers in high -value markets including automotive, transportation, packaging, construction and printing The company had 36 operating facilities in 11 countries as of December 31, 2005. History
    9. 9. Objectives of Acquisition • Higher profitability due to increased customer base i.e. increased scale and global footprint. • To gain access to global aluminium market and expand production capacity to keep pace with growing demand for aluminium. • This merger of Novelis into Hindalco will establish a global integrated aluminium producer with low-cost alumina • Aluminium production facilities combined with high-end aluminium rolled product capabilities. Hindalco got the fusion technology of Novelis which increased the formability of aluminium. • After merger Hindalco will emerge as the biggest rolled aluminium products maker fifth -largest integrated aluminium manufacturer in the world. Novelis had the capacity to 3 million tonnes while Hindalco had the capacity to produce 2,20,000 tonnes
    10. 10. Indian Deal makers • Team Members Kumar Mangalam Birla Debu Bhattacharya, Managing Director, Hindalco Sumant Sinha, Group CFO • Announced on Feb, 11, 2007 • Completed in May 2007 • Negotiation went for 18 months.
    11. 11. Hindalco AV Metals(Canada) Novelis(Canada) 100% Shares AV Aluminium(Canada) AV Minerals (Netherlands) 6 Billion dollarsS Aditya Birla Group 32 % stake 51 %
    12. 12. Financial Arrangements • Showing the finances necessary for paying off the shareholders and the debtors • ABN Amro Bank, Bank of America and UBS back- stopped the funding requirement at the recourse leg for USD 3.1 billion • UBS and ABN Amro Bank provided back-stop facilities of USD 2.4 billion that was to be used to pay off the existing lenders
    13. 13. • Once the shareholders approved the bid and the courts in Canada as well as regulatory authorities in several countries approved the acquisition, the funds required to pay off the shareholders was drawn down on 11 May, 2007 into AB Minerals and AB Metals
    14. 14. Deal structure Divided into 2 parts- 1. 100% of Novelis equity @44.93$ per share which add up to $3.6b 2. $2.4b debt on Novelis balance sheet No Option of Leverage buyout unlike TATA Corus as debt: equity=7.23:1
    15. 15. • The deal was all cash transaction of USD 6 billion which included a debt of USD 2.4 billion • Hindalco themselves contributed USD 450 million • Group company Essel unlisted contributed USD 300 million • USD 450 million through liquidation of investments • Hindalco paid USD 44.93 in cash for each outstanding common share of Novelis at 15 % premium
    16. 16. • Hindalco replaced existing USD 2.4 billion loan by term loan of USD 1 bn and high yield bonds of USD 1.4 bn
    17. 17. Valuation Concerns • Price paid by Hindalco being too high Price per share never crossed USD 30 In its guidance, Novelis indicated a PBT of approx. USD 35-100 million for 2007 The long term contracts coming to an end by 2010 Not to compete with Alcan Inc.
    18. 18. Equity Stock: Price Movements Volume Movements
    19. 19. 48460.7, 29% 1662.98, 1% 110807.76, 66% 4513.23, 3% 1018.31, 1% National Aluminium Company (Nalco) Associated Profiles and Aluminium Limited Hindalco Madras & Aluminium(Malco) PG Foils 2.18, 31% 1.1, 16%2.42, 35% 0.25, 4% 1, 14% National Aluminium Company (Nalco) Indian Aluminium (Indal) Hindalco Madras & Aluminium(Malco) Bharat Aluminium (Balco) Industry Overview before Acquisition of Novelis( in lac tonnes) Industry Overview after Acquisition of Novelis (in Sales)
    20. 20. Thank You Presented By: Anurag Pandey Omkar Salunke