5. • Global brand image.
• Cost effective producer.
• Sound financial position.
• A high degree quality consciousness is the core competence of the
company, ISO 9001 and ISO 14001 have added more prestige to the
company.
• Company has a well-established distribution network, covering a
geographically wide and scattered market.
5
STRENGTH
6. • Present production capacity is not adequate to meet the rising high
demand.
• Technology is not upgraded to mark as compare to global giants in
aluminium industry.
6
WEAKNESS
•R & D collabratation with universities and another research
organization.
•More emphasis on downstream production of value added
products.
•Recycling should be adopted as routine production.
•Raising more finance from marketing for more acquisition
and merger.
OPPORTUNITY
7. • Innovative revolution in plastic and steel industry.
• Reduce in Exide duty.
• Fall in price of Al. In neighbour country.
7
THREATS
8. Canada based company formed in early 2005 as a result of a
‘forced’ spin-off from its parent, the $ 23.6-billion aluminium
giant and Canada-based Alcan Inc.
Novelis is the world leader in aluminium rolling, producing an
estimated 19 percent of the world's flat-rolled aluminium
products.
The company is No. 1 rolled products producer in
Europe, South America and Asia, and the No. 2 producer in
North America.
9. With industry-leading assets and technology, the company
produced the highest-quality aluminium sheet and foil products
for customers in high -value markets including
automotive, transportation, packaging, construction and
printing
The company had 36 operating facilities in 11 countries as of
December 31, 2005.
History
10. Objectives of Acquisition
• Higher profitability due to increased customer base i.e. increased scale and global
footprint.
• To gain access to global aluminium market and expand production capacity to
keep pace with growing demand for aluminium.
• This merger of Novelis into Hindalco will establish a global integrated aluminium
producer with low-cost alumina
• Aluminium production facilities combined with high-end aluminium rolled
product capabilities. Hindalco got the fusion technology of Novelis which
increased the formability of aluminium.
• After merger Hindalco will emerge as the biggest rolled aluminium products
maker fifth -largest integrated aluminium manufacturer in the world. Novelis had
the capacity to 3 million tonnes while Hindalco had the capacity to produce
2,20,000 tonnes
11.
12. Indian Deal makers
• Team Members
Kumar Mangalam Birla
Debu Bhattacharya, Managing Director, Hindalco
Sumant Sinha, Group CFO
• Announced on Feb, 11, 2007
• Completed in May 2007
• Negotiation went for 18 months.
14. Financial Arrangements
• Showing the finances necessary for paying off the
shareholders and the debtors
• ABN Amro Bank, Bank of America and UBS back-
stopped the funding requirement at the recourse leg
for USD 3.1 billion
• UBS and ABN Amro Bank provided back-stop
facilities of USD 2.4 billion that was to be used to
pay off the existing lenders
15. • Once the shareholders approved the bid and the
courts in Canada as well as regulatory authorities in
several countries approved the acquisition, the funds
required to pay off the shareholders was drawn down
on 11 May, 2007 into AB Minerals and AB Metals
16. Deal structure
Divided into 2 parts-
1. 100% of Novelis equity @44.93$ per
share which add up to $3.6b
2. $2.4b debt on Novelis balance sheet
No Option of Leverage buyout unlike
TATA Corus as debt: equity=7.23:1
17. • The deal was all cash transaction of USD 6 billion which
included a debt of USD 2.4 billion
• Hindalco themselves contributed USD 450 million
• Group company Essel unlisted contributed USD 300
million
• USD 450 million through liquidation of investments
• Hindalco paid USD 44.93 in cash for each outstanding
common share of Novelis at 15 % premium
18. • Hindalco replaced existing USD 2.4 billion loan by
term loan of USD 1 bn and high yield bonds of
USD 1.4 bn
19. Valuation Concerns
• Price paid by Hindalco being too high
Price per share never crossed USD 30
In its guidance, Novelis indicated a PBT of approx.
USD 35-100 million for 2007
The long term contracts coming to an end by 2010
Not to compete with Alcan Inc.
21. 48460.7, 29%
1662.98, 1%
110807.76, 66%
4513.23, 3% 1018.31, 1%
National Aluminium
Company (Nalco)
Associated Profiles and
Aluminium Limited
Hindalco
Madras &
Aluminium(Malco)
PG Foils
2.18, 31%
1.1, 16%2.42, 35%
0.25, 4% 1, 14%
National Aluminium
Company (Nalco)
Indian Aluminium (Indal)
Hindalco
Madras &
Aluminium(Malco)
Bharat Aluminium (Balco)
Industry Overview before Acquisition of Novelis( in lac tonnes)
Industry Overview after Acquisition of Novelis (in Sales)
