Hindalco's subsidiary Novelis completes $2.8 bn acquisition of Aleris

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Aditya Birla Group metals flagship, Hindalco Industries, on Tuesday announced the completion of Aleris acquisition by its wholly-owned subsidiary Novelis Inc. The deal, which closed at an enterprise value of $2.8 billion, positioned Hindalco as one of the world’s largest aluminium companies, with a global footprint across 49 manufacturing facilities in North America, Europe and Asia.

Commenting on the development, Kumar Mangalam Birla, chairman, Aditya Birla Group, said, “The Aleris deal marks a major milestone for Hindalco and Novelis, on their path to global leadership. The closure of this deal amidst challenging market conditions, reflects our conviction in the Aleris business and its value to our metals portfolio."

"Periods of turmoil have historically seen the emergence of champions, powered by quality leadership and sound business fundamentals. This is a long-term strategic bet, much like Novelis was in 2007,” he added.

The completion of the deal comes at a time when industries across the world are impacted by the Covid-19 pandemic.

Birla said, the Aleris deal, enabled further diversification of the metals flagship's downstream portfolio, into other premium market segments, most notably aerospace.

"Through the creation of an industry champion, we are reinforcing our commitment to our customers, employees and shareholders. At the same time, with this further expansion in our aluminium portfolio, we have taken a decisive step towards a more sustainable future,” he said in the statement.

With the addition of Aleris’ operational assets and workforce, Novelis will serve the growing Asia market by integrating complementary assets in the region including recycling, casting, rolling and finishing capabilities. The acquisition is expected to generate approximately $150 million in synergies.

“The Aleris acquisition takes forward our aluminium value added products strategy and gives us entry into high-end aerospace," said Satish Pai, Managing Director of Hindalco Industries.

"It further insulates Hindalco-Novelis from global price volatility and sharpens our focus on the downstream business. Aleris enhances our strategic position in Asia and also solidifies our position as a leading global metals player with a stronger presence across the US and Europe as well," said.

"With a world-class workforce, a presence in the most competitive and technically demanding end-markets, and the ability to deliver rapid, adaptive and sustainable solutions, Novelis will be able to even better serve our customers,” said Steve Fisher, President and CEO, Novelis Inc.

The closing purchase price of $2.8 billion consists of $775 million for the equity value, and nearly $2 billion for the assumption, or extinguishment, of Aleris’ current outstanding debt and a $50 million earn-out payment.

The company said that legacy Aleris debt levels had increased since the initial acquisition announcement due to a rise in working capital to support the ramp up of operations, while the earn-out was related to stronger than expected performance by Aleris’ US business. The deal was announced in 2018.

Novelis will acquire Aleris’ 13 plants across North America, Europe and Asia, however, to satisfy regulatory conditions, the company is required to divest Aleris’ plants in Lewisport, Kentucky USA, and Duffel, Belgium, as announced earlier, the company said.

  • Deal closed at an enterprise value of $2.8 billion, EV multiple at 7.2x
  • Potential synergy benefits pegged approximately at $150 million on a recurring basis
  • Marks Novelis’ entry into the high-end aerospace segment

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