Merger & Acquisition (Hindalco & novelis

)
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4/15/12

. type of takeover Facts of the case synergy benefits. swap ratio and consideration activity. v v v v v v v v v sector snapshot proposal. due diligence. value to investors (stock mrkt perspective) 4/15/12 analysts view of the merger .Outline of the case.

Heroult technology used by all  Energy cost is 40% of manufacturing cost for metal and 30% for rolled products. 4/15/12  High . cost of technology is the main barrier in achieving high energy efficiency.INTRODUCTION Industry overview:  Highly concentrated industry with only five primary plants in the country.   Bayer-Hall- producers.

wire rods.  • • 4/15/12 .  Structured into two strategic businesses Aluminium and Copper. Annual revenue of US $14 billion. primary aluminium ingots. It enjoyed domestic market share of 42% In primary aluminium. 63 % in rolled products. and billets. The aluminum division's product range includes alumina chemicals. rolled products. market capitalization in excess of US $ 23 billion. foils and alloy. 44 % in Foils & 31% in wheels.Hindalco Industries Ltd. extrusions. 20 % In extrusion .

involved extensive operations in over 35 plants in 11 countries and four continents. 2 producer in North America. the $ 23.6-billion aluminium giant and Canada-based Alcan. 4/15/12  The  The  This . 1 rolled products producer in Europe.Novelis  It was born in early 2005 as a result of a forced’ spin-off from its parent. South America and Asia. company is No. and the No. US and European anti-trust proceedings ruled that the rolled products business of either Alcan or Pechiney had to be divested from the merged entity.

The company recycles more than 35 billion used beverage cans annually. Industry-leading assets and technology. • Novelis is the world leader in aluminium rolling. Alcan cast out its rolled products business to form Novelis.Contd…. • • • 4/15/12 . producing an estimated 19 percent of the world's flat-rolled aluminium products.

Synergy benefits :  The combination of Hindalco and Novelis will establish a global integrated aluminum producer with low-cost alumina in the low cost Aluminium Production and novelis in the aluminium rolled products major market share  Hindalco  the 4/15/12 .

and half of that increase will be for the kind of flat-rolled products Novelis produces. Thus. India could absorb a third of the North American company’s output in three years’ time 4/15/12 .Effect of merger on industry  India’s demand for aluminium products is projected to double from 1 million tones in 2007 to almost 1.9 million tones in 2012.

flat rolled products in fast-growing markets such as India and China 4/15/12 . assets and expertise can be leveraged to grow high-value-added. should act as a natural hedge for LMEdriven. volatile. ü Industry leading technology.ü Downstream business derives its margin through conversion mark-up. upstream commodity business.

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 4/15/12 .Deal structure Divided into 2 parts1)100% of Novelis equity @44.

ü Immediate global reach and scale along with technological expertise. ü After merger Hindalco will emerge as the biggest rolled aluminium products maker and fifth -largest integrated aluminium manufacturer in the world. and Coca-Cola Co 4/15/12 . ü access to customers such as General Motors Corp.Due dilignce The rationale: ü The merger of Novelis into Hindalco will establish a global integrated aluminium producer with low-cost alumina and aluminium production facilities combined with high -end aluminium rolled product capabilities.

Tied up with ABN Amro Bank.2%] & 900 million  Hindalco ◦ ◦ raised a debt of $2.8 billion.4 ◦ billion will be raised on the balance sheet of Novelis AV Minerals (Netherlands) a indirect subsidiary of Hindalco raised bridge loans of $2. chipped in with $300 million from its reserves. Bank of America and UBS for the Asian leg of the transaction.FUNDING A MEGA-DEAL: 2007  $2. ◦ ◦ $450 million from its cash reserves Essel Mining.13 billion [CR @ 7. another A V Birla group company. The non-recourse debt raised on Novelis' books funded through ABN Amro and UBS 4/15/12 .

 Hindalco has set Novelis a target of seven to 12 stock turns per year by 2010.which could free around $300 million in working capital 4/15/12 .Business Process Integration  Plain and simple techniques to manage business.  It set up a company to manage IT functions of Novelis due to availability of inexpensive engineers.

403 shares. 5. 96 per share  Ratio of 3:7 in September.  4/15/12 .valuatuion Hindalco issued equity shares of Re.545 Cr  Rs.802.  Aggregating to 525. 4.70 Cr  Company has received Rs.  Total Amount receivable of Rs.047. 1 each on rights basis @ Rs. 124.90 Cr spent on related expenses of the rights issue  Balance amount utilized to repay the bridge loan taken for acquisition of Novelis.

not only to higher-end products but also to superior technology.5 million metric tonne by 2012 to become one of the world’s five largest producers from the position of world’s 13th-largest aluminium maker till 2007 4/15/12 .  This was in line with Hindalco’s plans to  triple aluminium output to 1. This acquisition gave Hindalco access.Analyst view:  There were significant geographical market and product synergies  .

the joint entity will become insulated from the fluctuation of LME Aluminium prices The deal will give Hindalco a strong presence in recycling of aluminium business. After full integration.Benefits: Post acquisitions. the company will get a strong global footprint. Novelis has a very strong 4/15/12  .

THANK YOU 4/15/12 .

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