Case study Merger

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The case discusses the acquisition of US-Canadian aluminum company Novelis by India-based Hindalco Industries Limited (Hindalco), a part of Aditya Vikram Birla Group of Companies, in May 2007. The case explains the acquisition deal in detail and highlights the benefits of the deal for both the companies.

It also examines the valuation of the acquisition deal and how the deal was financed. The case concludes by describing the challenges that Hindalco would face in integrating the operations of Novelis and analyzing if the deal was overvalued as opined by some industry experts.

bstract:
Issues:
» Study the synergies of the merger between Hindalco and Novelis
» Study the rationale behind Hindalco acquiring a loss making aluminum company
» Examine the way the acquisition deal was financed
» Analyze whether the deal was overvalued or not
» Analyze the trends in the global aluminum industry

Keywords:
Hindalco Industries Limited, Novelis Inc., Merger and Acquisition, Deal Valuation, Debt-equity Ratio, EV/EBITDA Ratio, Indian Aluminum Industry, Merger Integration, Consolidation, Downstream Business, Upstream Business

"The acquisition will catapult the group into the Fortune 500 league, three years ahead of the target. The combination of Hindalco and Novelis will establish a global integrated aluminium producer."1
- Kumar Mangalam Birla, Chairman of Hindalco, in February 2007.
"The combination of Novelis's world-class rolling assets with Hindalco's growing primary aluminum operations and its downstream fabricating assets in the rapidly growing Asian market is an exciting prospect."2
- Ed Blechschmidt, Acting Chief Executive of Novelis, in February 2007.

Introduction

On May 16, 2007, India-based Hindalco Industries Limited (Hindalco), a subsidiary of the AV (Aditya Vikram) Birla Group of Companies (Aditya Birla Group), acquired the US-Canadian aluminum giant Novelis Inc. (Novelis).

The acquisition was the result of an agreement arrived

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