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Hindalco's US subsidiary Novelis to buy Aleris for $2.6 billion; deal to solidify its position globally

Hindalco's US subsidiary Novelis to buy Aleris for $2.6 billion; deal to solidify its position globally

Under the definitive agreement, Novelis will take over 13 manufacturing facilities of the aluminium company spread across North America, Europe and Asia.

Aditya Birla Group's Hindalco Industries Ltd's US subsidiary Novelis will buy Aleris Corporation, one of the largest aluminium producing companies in the United States, for $2.6 billion. The deal amount includes $1.8 billion worth of debt that Aleris has on its balance sheet and $775 million of equity. "The acquisition is value accretive from the first year itself, both in terms of cash flows and net profit, which is rare for acquisition as big as this," BloombergQuint quoted Kumar Mangalam Birla, Chairman, Aditya Birla Group as saying.

Under the definitive agreement, Novelis will take over 13 manufacturing facilities of the aluminium company spread across North America, Europe and Asia. The combined company will have pro forma revenues of around $15 billion and will operate 37 facilities, across 11 countries, with an employee base of around 16,500.

The proposed acquisition will help the combined entity establish a more diverse product portfolio, ranging from high-end aerospace to beverage can and automotive to specialty products.

"Acquiring Aleris is the right opportunity at the right time as they are set for transformational growth," said Steve Fisher, President and CEO, Novelis Inc.

"Their investments, coupled with a diverse and talented workforce, will add tremendous value to our organisation and allow us to deliver the highest quality innovative aluminium solutions to our customers," he added.

The acquisition is subject to customary closing conditions and regulatory approvals and is expected to close in 9-15 months. Until the closing, the companies will continue to operate as separate entities.

"Our focus on keeping a disciplined balance sheet will continue," said Devinder Ahuja, Senior Vice President and Chief Financial Officer of Novelis. "The pro forma net debt to Adjusted EBITDA is forecasted to peak below 4x at closing, and return to 3x in approximately two years," he added.

Once the deal is finalised, the two companies will integrate Aleris into Novelis, which will remain headquartered in Atlanta. Novelis Inc is the world's largest recycler of aluminium, while Aleris is a global leader in aluminium rolled products production, with around $3 billion in annual revenue.

Here's what the combined entity would gain from the deal:

  • A more diverse product portfolio, including aerospace, beverage can, automotive, building and construction, commercial transportation and specialty products.
  • Expansion of assets in Asia to recycling, casting, rolling and finishing capabilities.
  • Broadening Novelis' automotive business on globally.
  • Strengthening the company's ability to compete against steel by gaining a greater platform.

(Edited by Manoj Sharma)