Hindalco acquired Novelis, a leading aluminum rolling company, for approximately $6 billion. This was Hindalco's largest acquisition to date and established Hindalco as one of the world's largest aluminum producers, with facilities on five continents. The acquisition was financed through both debt and Hindalco's cash reserves, and was intended to give Hindalco access to Novelis' downstream aluminum products business and expertise in recycling. After the acquisition, Hindalco saw large increases in revenue and profitability, and has pursued further expansion plans to capture synergies from combining Novelis' aluminum rolling operations with Hindalco's existing aluminum production facilities.
2. Introduction
• Acquisition
• Part of inorganic growth strategy
• Completed this acquisition through its wholly-owned
subsidiary AV Metals Inc
• Novelis will operate as a subsidiary of Hindalco.
3. Hindalco
• Hindalco established in 1958
• Operation Started in 1962
• Revenue and market capitalization
• Division in Product
• 'Our vision is to be a premium metals major, global in
size and reach .... The acquisition of Novelis is a step in
this direction‘ -Kumar Mangalam
Birla, Chairman, Hindalco Industries
4. Novelis
• Novelis is the world leader in aluminium
rolling, producing nearly 20 percent of the
world's flat-rolled aluminium products.
• Created in 2005 as a spin-off from aluminium
producer Alcan Inc.
• Industry leading assets and technology.
• Has a net Worth of $322 million and has debt
of $2.33 billion.
• The company is No.1 rolled products producer
in Europe, South America and Asia, and No 2
in North America.
5. Funding Of The Deal
• Deal was agreed at approx $6 Billion.
• Deal would be financed through a Recourse debt of $2.8 billion.
• $2.4 billion will be raised on the balance sheet of Novelis.
• Hindalco would contribute $450 million from its cash reserves.
• SL Iron Ore Mining ,another A V Birla group company, will
chip in with $300 million from its reserves.
• The group has tied up with ABN Amro Bank, Bank of America
and UBS for the Asian leg of the transaction, while the non-
recourse debt raised on Novelis' books will be funded through
ABN Amro and UBS.
6. The Rationale Behind Acquisition
• Establish a global integrated aluminium producer with low-cost
alumina and aluminium production facilities combined with high -
end aluminium rolled product capabilities.
• Make Hindalco the biggest rolled aluminium products maker and 5th
largest integrated aluminium manufacturer in the world.
• Strong presence inFinancial Management-I business
aluminums recycling
• Increasing scale of operation, entry into high—end downstream
market
• General Motors Corp. and Coca-Cola Co.
• Global presence
• Novelis Fusion
7. Post acquisition
• Hindalco has undertaken aggressive plans to increase its capacities
• Post the acquisition of Novelis effective 15 May 2007; Hindalco is now a
global player with a strong presence in five continents and with a product
portfolio which is a natural hedge against the volatility of aluminium prices.
Novelis has reported a net profit of USD 28 million (under US GAAP) for the
period 16 May 2007 to 31 March 2008.
• The total revenue for the year at Rs. 60,013 crore and PBIT at Rs. 4,835 crore
were up by 211 per cent and 22 per cent respectively over last year.
• Aluminium business revenue was Rs. 47,054 crore and PBIT was Rs. 3,214
crore, while the copper revenue was Rs.12, 340 crore with a PBIT of Rs. 931
crore.
• Intigraton Process