$2.8-billion deal: Hindalco completes acquisition of Aleris

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Published: April 15, 2020 9:24 AM

Last week, the company received the final approval from European Commission for the acquisition of Aleris, after the sale of Duffles facility.

hindalco industries, hindalco aleris acquisition, hindalco deals, hindalco business expansion, hindalco futureAditya Birla Group chairman Kumar Mangalam Birla said that deal would enable further diversification of metals downstream portfolio into other premium market segments.

Hindalco Industries on Tuesday announced the completion of the acquisition of Aleris Corporation for an enterprise value (EV) of $2.8 billion, a shade higher than the $2.6 billion announced earlier.

Aditya Birla Group chairman Kumar Mangalam Birla said that deal would enable further diversification of metals downstream portfolio into other premium market segments, most notably aerospace.

The acquisition, which was made via wholly-owned subsidiary Novelis, will generate approximately $150 million in synergies.

Novelis will acquire Aleris’ 13 plants across North America, Europe and Asia; however, to satisfy regulatory conditions, the company is required to divest Aleris’ plants in Lewisport, Kentucky, US, and Duffel, Belgium, as announced earlier. The money received by these sales will flow back into Aleris.

The deal for Duffel plant has been struck with Liberty House Group’s Sanjeev Gupta for an undisclosed sum, while sale of Lewisport is yet to fructify.

Hindalco Industries managing director Satish Pai said, “The Aleris acquisition takes forward our aluminium value-added products strategy and gives us entry into high-end aerospace. It enhances our strategic position in Asia and also solidifies our position as a leading global metals player, with a stronger presence across the US and Europe as well.”

The change in the EV resulted from an increase in legacy debt levels of Aleris — due to a rise in working capital — from the time the acquisition was first announced. The combined net debt to adjusted Ebitda of approximately 3.3x is within the recently updated guidance of below 3.5x and well below the initial outlook of below 4x at the time of transaction announcement, the management said.

“On a trailing 12-month basis ended December 31, 2019, the legacy stand-alone adjusted Ebitda stood at $388 million, higher than that estimated at the time of deal announcement. Despite the increase in legacy Aleris debt, the implied enterprise value multiple of 7.2x, is in line with our acquisition case, on account of better Ebitda performance,” the company statement said.

Birla said, the Aleris deal marks a major milestone for New Delhi Hindalco and Novelis, on their path to global leadership. “The closure of this deal amidst challenging market conditions, reflects our conviction in the Aleris business and its value to our metals portfolio. Periods of turmoil have historically seen the emergence of champions, powered by quality leadership and sound business fundamentals. This is a long-term strategic bet, much like Novelis was in 2007,” Birla said.

Last week, the company received the final approval from European Commission for the acquisition of Aleris, after the sale of Duffles facility. With the addition of Aleris’ operational assets and workforce, Novelis is poised to serve the growing Asia market by integrating complementary assets in the region including recycling, casting, rolling and finishing capabilities.

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