Hindalco - Novelis Acquisition: Creating an Aluminium Global Giant

Only available on StudyMode
  • Topic: Aluminium, Aditya Birla Group, Aluminium companies
  • Pages : 23 (7265 words )
  • Download(s) : 83
  • Published : February 8, 2011
Open Document
Text Preview
ABSTRACT
HINDALCO - NOVELIS ACQUISITION: CREATING AN ALUMINIUM GLOBAL GIANT
Last decade witnessed growing appetite for takeovers by Indian corporate across the globe as a part of their inorganic growth strategy. In this chain Indian aluminium giant Hindalco acquired Atlanta based company Novelis Inc, a world leader in aluminium rolling and flat-rolled aluminium products. Hindalco Industries Ltd., acquired Novelis Inc. to gain sheet mills that supply can makers and car companies. Strategically, the acquisition of Novelis takes Hindalco onto the global stage as the leader in downstream aluminium rolled products. The transaction makes Hindalco the world's largest aluminium rolling company and one of the biggest producers of primary aluminium in Asia, as well as being India's leading copper producer. The case study attempts to analyze the financial and strategic implications of this acquisition for the shareholders of HINDALCO. The case explains the acquisition deal in detail and highlights the benefits of the deal for both the companies. Followings are the main issues to be discussed for critical review of this case:

 What is the strategic rational for this acquisition?
 Were the valuation for this acquisition was correct?
 What are financial challenges for this Acquisition?
 What is the future outlook of this acquisition?2
HINDALCO - NOVELIS ACQUISITION: CREATING AN ALUMINIUM GLOBAL GIANT
'We look upon the aluminium business as a core business that has enormous growth potential in revenues and earnings,' 'Our vision is to be a premium metals major, global in size and reach .... The acquisition of Novelis is a step in this direction' -Kumar Mangalam Birla, Chairman, Hindalco Industries

____________________________________________________________

__________________
1. INTRODUCTION
Mergers and Acquisitions have been the part of inorganic growth strategy of corporate worldwide. Post 1991 era witnessed growing appetite for takeovers by Indian corporate also across the globe as a part of their growth strategy. This series of acquisitions in metal industry was initiated by acquisition of Arcelor by Mittal followed by Corus by Tata’s. Indian aluminium giant Hindalco extended this process by acquiring Atlanta based company Novelis Inc, a world leader in aluminium rolling and flat-rolled aluminium products. Hindalco Industries Ltd., acquired Novelis Inc. to gain sheet mills that supply can makers and car companies. Strategically, the acquisition of Novelis takes Hindalco onto the global stage as the leader in downstream aluminium rolled products. The acquisition of Novelis by Hindalco bodes well for both the entities. Novelis, processes primary aluminium to sell downstream high value added products. This is exactly what Hindalco manufactures. This makes the marriage a perfect fit. Currently Hindalco, an integrated player, focuses largely on manufacturing alumina and primary aluminium. It has downstream rolling, extruding and foil making capacities as well, but they are far from global scale. Novelis processes around 3 million tonnes of aluminium a year and has sales centers all over the world. In fact, it commands a 19% global market share in the flat rolled products segment, making it a leader.

Hindalco has completed this acquisition through its wholly-owned subsidiary AV Metals Inc and has acquired 75.415 common shares of Novelis, representing 100 percent of the issued and outstanding common shares AV Metals Inc transferred the common shares of Novelis to its wholly-owned subsidiary AV Aluminium Inc. The deal made Hindalco the world's largest aluminium rolling company and one of the biggest producers of primary aluminium in Asia, as well as being India's leading copper producer. Hindalco Industries Ltd has completed its acquisition of Novelis Inc under an agreement in which Novelis will operate as a subsidiary of Hindalco.

2. INDUSTRY OVERVIEW: GLOBAL
Globally, newer...
tracking img