The combining of two or morecompanies, generally by offering thestockholders of one company securitiesin the acquiring company in exchangefor the surrender of their stock. When one company takes over another and clearly established itself as the new owner, the purchase is called an acquisition.
STRENGTH • 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.7
WEAKNESS • 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. OPPORTUNITY •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.8
THREATS • Innovative revolution in plastic and steel industry. • Reduce in Exide duty. • Fall in price of Al. In neighbour country.9
It was born in early 2005. The $ 23.6-billionaluminium giant and Canada-based.The company is No. 1 rolled products producer inEurope, South America and Asia, and the No. 2producer in North America.Novelis is the world leader in aluminium rolling,producing an estimated 19 percent of the worldsflat-rolled aluminium products.
Objectives of Acquisition• Higher profitability• 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.• After merger Hindalco will emerge as the biggest rolled aluminium products maker.
Objectives of Acquisition• fifth -largest integrated aluminium manufacturer in the world.• Hindalcos position as one of the lowest cost producers of primary aluminium in the world is leverage able into becoming a globally strong player.• The Novelis acquisition will give the company immediate scale and strong a global footprint.• Cost of Acquisition lower than setting up a green field plant and marketing and distribution channel.
Indian Deal makers• Team Members Kumar Mangalam Birla Debu Bhattacharya, Managing Director, Hindalco Sumant Sinha, Group CFO• Announced on Feb, 11, 2007• Negotiation went for 18 months.• Approval of at least two thirds shareholders.
• Hindalco share plunged 13.74 per cent.• All-cash transaction• Aluminium producer with low-cost alumina.• Fifth -largest integrated aluminium manufacturer in the world.
Deal structureDivided into 2 parts-1)100% of Novelis equity @44.93$ per share which add up to $3.6b2)$2.4b debt on Novelis balance sheet - No Option of Leverage buyout unlike TATA Corus
Conclusion We look upon the Aluminium business as a core business that has enormous growth potential in revenues and earnings,’ Our vision is to be a premium metals major, global in size and reach .... The acquisition of Novelis is a step in this direction Mr. Kumar Mangalam Birla, Chairman, Hindalco Industries.17