After the Tata Group's winning bid for Corus, now the Aditya Birla Group has imprinted the Indian stamp on the global metals market by expanding its global base through a large overseas acquisition.
Aluminium and copper major Hindalco Industries, the Aditya Birla Group flagship, would acquire Canadian company Novelis Inc in an all-cash deal.
The acquisition would make Hindalco the global leader in aluminium rolled products and one of the largest aluminium producers in Asia. With post-acquisition combined revenues in excess of $10 billion, Hindalco would enter the Fortune-500 listing of world's largest companies by sales revenues.
Though there were some isolated reports in the domestic media about the possibility of such a deal, there was no frenzied reporting of the kind witnessed by the highly public battle between Tata Steel and Brazilian company CSN for European steelmaker Corus.
Novelis had announced recently that it was in discussions with various parties which could lead to a possible sale of the company. Though it was speculated that Hindalco was one of the potential buyers, the company's chances were considered slim.
Hindalco and Novelis have signed a definitive agreement for the acquisition, which values Novelis at around $6 billion. After excluding the $2.4 billion of debt, the equity component of the deal works out to $3.6 billion. Novelis shareholders would receive $44.93 per share in cash. This is a substantial value appreciation for Novelis shareholders as the stock has more than doubled in recent weeks, after the company confirmed the possible sale.
Announcing the acquisition by Hindalco in an all-cash deal, group chairman Kumar Mangalam Birla said the deal, which is expected to close in the second quarter of 2007, would double Hindalco`s turnover immediately.
Birla elaborated that the combination would establish a global integrated aluminium producer with low-cost alumina and aluminium production facilities combined with high-end aluminium rolled product capabilities.
The Hindalco-Novelis combine, which would have a current market capitalisation of over $7.5 billion, would propel Hindalco to become world`s largest aluminium rolling company, one of the biggest producer of primary aluminium in Asia and India`s leading copper producer. Novelis currently operates in 12 countries and has an employee strength of over 12,000 employees.
Birla said, "The acquisition of Novelis is a landmark transaction for Hindalco and our Group. It is in line with our long-term strategies of expanding our global presence across our various businesses and is consistent with our vision of taking India to the world."
The transaction would be by way of a plan of arrangement under Canadian law. The deal would require the backing of two-thirds of Novelis shareholders for completion and would be subject to regulatory approvals. The deal is expected to be completed by the second quarter of 2007.
Hindalco is expected to raise around $2.8 billion in debt to finance the transaction besides $450 million from its own internal resources and $300 million from a group company. The existing debt of Novelis is also likely to be re-financed by Hindalco.
Novelis was spun off in 2005 from Canadian company Alcan, the world's second largest aluminium manufacturer, to escape anti-trust regulations following the acquisition of European metal company Pechiney.
Novelis is the largest manufacturer of aluminium rolled products in the world and controls nearly 20 per cent of the market. Rolled products are used mostly for making food and beverage cans besides automobile components and as construction material. Its list of customers includes beverages giant Coca Cola, beer major Anheuser-Busch and can maker Rexam besides auto companies like GM and Ford.
Though headquartered in Toronto, Canada, Novelis has its executive offices in Atlanta, US. Novelis has operations in 11 countries including the US, Canada and Brazil besides a JV in Germany, which is 50-per cent owned by the company. For the nine months ended September 2006, the company has reported a net loss of $170 million on revenues of $7.4 billion as compared to a net income of $32 million on revenues of $6.3 billion during the same period of previous year. For the year 2005, Novelis had reported a profit of $10 million on revenues of $8.4 billion. The company has close to 12,500 employees worldwide.