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HINDALCO-NOVELIS DEAL
Industry Overview:
The other players include Indal which is now a part of Hindalco. There
are also players like Balco and Malco.
All plants have their own captive power units for cheaper and un-
interrupted power supply.
Energy is 40% of manufacturing cost for metals and 30% for rolled
products.
It also ranks among the top quartile of low cost producers in the world.
Shareholding Pattern:
Operations In India:
Global Presence:
Consolidated Hindalco:
Hindalco Business:
Production Capacities:
Expansion Plans:
Stock Highlights:
Stock Reactions:
Peer Comparison:
Future Outlook:
About Novelis:
Some of its customers include- Coca- Cola, Ford and General Motors.
Global Presence:
Product Portfolio:
SUSHANT WARERKAR Page 13
HINDALCO-NOVELIS DEAL
World Of Novelis:
Diversified Presence:
Growth Model:
This acquisition gives access for Hindalco to high-end products and also
superior technology.
Hindalco also get the fusion technology of Novelis which increases the
formability of aluminium.
The identity of other bidders and the price they offered are not known,
though Birla said that the bidding was very competitive.
If the 66.66% approval is not obtained, Birla has the right to walk away
from the deal.
Hindalco made the Novelis board sign a $100- million breakfee, the price
Novelis has to pay if it finds another buyer.
There was also a clause of ‘new buyer premium ’of a ‘few dollars a share’
over the 44.93$ per price- only at that price can Novelis entertain a fresh
rival bid.
The deal was an all cash transaction of US $6 bn, which included debt
of US $ 2.4bn.
Hindalco will pay $ 44.93 in cash for each outstanding common share
of Novelis, around 15% premium to the market price.
Novelis has a global market share of 19% while Hindalco enjoys a share
of 60% in the rolled products market.
Novelis reported net sales of US $7.4 bn and net loss of US $170 million
in nine months during 2006, on account of low contract prices.
Funding Structure:
Funding Pattern:
Aditya Birla group company Essel Mining will contribute USD 300
million.
Financial Challenges:
The company will move from high margin metal business to low margin
downstream products business.
The acquisition will more than triple Hindalco’s revenues, but will
increase the debt burden and erode profitability.
Risk Factors:
The deal will create value only after completion of Hindalco’s expansion
plans, and due to its highly leveraged position, its plans may get affected.
Some of the customers are significant to the company’s revenues and any
change in their business or financial conditions could adversely affect the
company’s business.
The end-use markets for certain products of Novelis products are highly
competitive and customers are willing to accept substitutes for the
company products.
FUTURE:
Future Of Aluminium:
Investment Required:
Financials:
1. Consolidated:
4. Segmental Performance:
6. Operational Performance:
7. Production Growth:
SWOT Analysis:
Strengths:
Weakness:
Opportunities:
Threat: