Hindalco slips past Sterlite to grab Indal

24 March 2000

Two years ago, Indian Aluminium rejected a takeover bid from Sterlite Industries. Now it has agreed to sell out to the A V Birla group's Hindalco Industries in an all-cash deal. The price: Rs 190 per share, which is at a premium of Rs 70 over Indal's market price on 23 March 2000.

Hindalco is paying Indal's parent, Alcan of Canada, Rs 738 crore for its 54.6 per cent stake in Indal. It is also committed to making a public offer for a further 20 per cent, which will take the total price to Rs 1,008 crore. That makes it the biggest all-cash takeover deal in corporate India so far.

Hindalco will fund the entire takeover through internal accruals.
Earlier Hindalco had lost the opportunity to take over India Foils Ltd, which was acquired by Sterlite Industries. But that has only whetted the A V Birla group's for axquisitions. This is the second major acquisition by the group. It recently acquired Coats Viyella's garments operations in India for Rs 236.23 crore.

Just two years ago, in February 1998, Alcan had rejected Sterlite Industries' offer to buy a stake in Indal, saying Alcan was fully committed to Indal and had confidence in its management. After Sterlite's unsolicited bid the Canadian company paid Rs 200 a share to raise its stake in Indal to 54.6 per cent from the earlier 34.6 per cent. Sterlite's final bid was Rs. 221 per share, including Rs. 175 in cash and the balance in 'optionally convertible preferential shares'.

People, projects will stay
The Indal board will be reconstituted, with Alcan's representatives being replaced by AV Birla group directors. Hindalco's president and whole-time director A K Agarwala will head the combined entity. Group chairman Kumar Mangalam Birla has announced that Indal's top management and employees would not be affected by the changes.

The acquisition will not affect Hindalco's expansion project. Given the company's comfortable debt-equity ratio, it will be able to fund this expansion through a marginal increase in the debt level.