Mergers And Aquisition

Mergers and aquisition

By Sudhir Nair Fin 2 FW08/10 IIPM Bangalore

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Company Profile 1. Hindalco Industries Limited and Indian Flagship company of Aditya Birla Group incorporated in 1962. 2. Main Product : Aluminium Copper . 3. One of the biggest producers of primary aluminium in Asia.

1. Novelis Inc. is a Canadian company incorporated in January 2005.

2.

Main Product : Aluminum rolling Aluminum can recycling.

3. Produces of an estimated 19% of the world’s total aluminum rolled products

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Contd… 4. $28 billion multinational conglomerate .

4. US $11.2 billion.

5. Operations in 25 countries.

5. Operation in 11countries.

6. Approx 100,000 employee.

6. Approx 12700 employee.

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Product Hindalco

Note*Leading producer of primary Aluminum in Asia 4/21

Product Novelis

Note*Leading the World in Aluminum Rolled Products with 19% overall share

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Customer NOVELIS           

Audi. BMW. Coca-Cola. Crown Cork & Seal. Ford. General Motors. Hyundai. Jaguar . Kodak. Agfa-Gevaert. Anheuser-Busch. 6/21

WHY THEY MERGE?

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Hindalco The Hindalco and our group should follow some inorganic growth strategy which allign 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."

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HOW NOVELIS BORN

$ 23.6-billion Aluminium giant and Canadabased

French Aluminium company PECHINEY

ALCAN

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Problem Child NOVELIS born in early 2005 9/21

Novelis Later, on net worth of $322 million, a debt of $2.33billion I have inherited Debt mountain of almost $2.9 billion, on capital base only $ 500 million

That’s a debt-equity ratio of 7.23:1. oh my god! Management’s wrong judgement led to losses of $350 million (in 2006).

Problem Child 10/21

Strategy Behind Hindalco 

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Customers like: Coca-Cola. General Motors. BMW . Ford . Hindalco penetrate highly valued US market.

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Novelis can help in forward integration.

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Full global expansion plan.

Novelis 

To overcome pressure of huge debt.

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Availability of raw material like lowcost alumina and aluminium production

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SENERGY BEHIND MERGER

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Synergy Hindalco + Novelis 

Global integrated aluminum producer with low cost alumina and aluminum production facilities combined with high-end aluminum rolled product capabilities.

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The company will get a strong global footprint.

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The deal will give Hindalco a strong presence in recycling of aluminium business. To produce primary aluminium again.

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Synergy Hindalco + Novelis 

Novelis has a very strong technology for value added products and its latest technology ‘Novelis Fusion’ is very unique one.

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It would have taken a minimum 8-10 years to Hindalco for building these facilities,if Hindalco takes organically route.

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VALUE CHAIN New tech Novelis Fusion for Hindalco

Novelis can Procure raw material from Hindalco rather than getting from outside

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STRUCTURE FOR THE DEAL

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Deal  

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All Cash Transaction. Values Novelis at approximately US$6 billion, including approximately US $2.40 billion of debt. Cash component for financing the deal stands at US$ 3.5 billion. Under the terms of the agreement, Novelis shareholders received US $44.93 in cash for each outstanding common share . Hindalco Used AV Metals — the Birla group's Canada-based special purpose vehicle (SPV) – which infused US$ 3.5 billion to finance Hindalco's proposed acquisition. AV Metals will take loans worth US$ 2.8 billion from three financial institutions, namely UBS, ABN Amro and Bank of America.

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THE OUTCOME • Global footprint=According to Kumarmangalam Birla, the deal made strategic sense. "The Novelis acquisition will give us immediate scale and a global footprint.  Company level=Hindalco would enter the Fortune 500 league, 3 year before it schedule to do according to its internal target.  Revenue=Novelis acquisition would increase birla groups overseas revenue to 40 per cent in three years.  Management=The Novelis management remained unchanged after the acquisition. Hindalco took a call on joining the board later.  Job cuts =No job cuts at Novelis

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Ratio

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Thank You GET FORWARD TO YOU SOON WITH NEXT ACTION

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