Hindalco inks deal to buy US firm for $2.6 billion, takes big leap into aerospace

The deal will include $775 million of equity and $1.8 billion of debt which will be funded through Novelis, Kumar Mangalam Birla, chairman of Aditya Birla Group said.

By Mail Today Bureau  
Friday, July 27, 2018

Aditya Birla Group company Hindalco Industries Ltd announced on Thursday that its subsidiary Novelis Inc has signed a definitive agreement to buy US aluminum maker Aleris Corporation for $2.58 billion, giving the company an entry into the high-tech aerospace sector and a higher customer base in the fast-growing car industry.

The deal will include $775 million of equity and $1.8 billion of debt which will be funded through Novelis, Kumar Mangalam Birla, chairman of Aditya Birla Group said at a press conference. The deal will be closed in the next nine to fifteen months and is subject to customary closing conditions and regulatory approvals.

Birla said, "the acquisition of Aleris is the next phase of our growth strategy. This will solidify our position as the world's No.1 aluminium value-added products player. We will have a presence throughout the downstream aluminium value chain in Asia, positioning us for future growth in the region," he added.

As part of the acquisition, Novelis will acquire 13 manufacturing facilities of Aleris across North America, Asia and Europe. Aleris is a value accretive acquisition for Hindalco and potential synergies from the acquisition are $150 million on a recurring basis.

Hindalco managing director Satish Pai said Aleris has invested $900 million in the last two years, and the only investment in the company we will have to do is up to $350 million for integration of an auto plant in China over the next two to three years.

Birla said since Hindalco's $6 billion acquisition of Novelis in August 2007, Novelis has further invested $2 billion in the business over the last decade. The focus has been on building an early mover position in the automotive markets, creating differentiation through its sustainable operating model of recycling and deepening its commitment to future growth markets in South America and Asia.

As a result, Novelis today is the world's number 1 Company in the aluminium value added products segment in terms of size and in segments like automotive and beverage cans and its earnings have grown many fold since its acquisition.

At a market segment level, the acquisition enriches the portfolio with the fast growing automotive segment and entry into the high-end technology driven aerospace segment.

Moreover, access to the continuous-cast capabilities would enhance Hindalco's competitive position in the building and construction (B&C) segment. From a footprint perspective, Aleris has a wide base of manufacturing locations. This not only deepens the combined entity's presence in developed markets like the US and Europe, but it also positions Novelis well in the emerging markets of Asia.

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