Aditya Birla Group acquisition: Kumar Mangalam Birla led Aditya Birla Group today announced today that Novelis that it has bought out Ohio-based aluminium maker Aleris Corp for $2.6 billion. Earlier, negotiations had slowed down primarily due to antitrust issues surrounding Aleris. The talks had revived after the managements of Aleris and the Aditya Birla Group, represented by its North America subsidiary Novelis, reached an agreement over the extent of responsibility both sides will bear to pass the scrutiny of the Committee on Foreign Investment (CFI), media reports said. Explaining the countours of the deal, Kumara Mangalam Birla said, “Novelis today has signed an agreement to acquire Aleris. Aleris is one of the leading privately-held aluminium roll products company globally. It is being acquired by Hindalco for $2.58 billion.” We take a closer look at the deal.
Key terms of definitive agreement
The $2.58 billion deal is broken into $770 million for the equity part of it, and the balance $1.8 billion being debt. “There will be a $50 earn-out, the details for which will be shared later. The deal will be fully financed in the books of Novelis, and there will be no equity issuance, not from Hindalco and not even from Novelis. I believe that the transaction should close in the next 9-15 months. I believe that this is the right opportunity for Novelis. It will be a 100% debt funded deal, on Novelis books,” Kumar Mangalam Birla said.
Taking stock of the strategic rationale, Birla said that it will help the company to improve its product portfolio, and also include more premium segments to meet rising demand from China. “Aleris is a global supplier of aerospace as well as automotive sheets. It is a leader in the building and construction segment and the truck trailer segment. This acquisition complements our strategy to include premium segments, which have not been present so far, especially the high end aerospace domain,” he said.
According to Kumar Mangalam Birla, the major deal also helps both the companies to integrate their assets and enhance recycling, rolling and casting capabilities. “This brings about a much more solid presence in Asia. This will help us to meet the fastest growing demand from China, and the sector at large, which is growing at 14% per annum. It helps us to diversify and gives up access to a larger customer base,” he said in the press conference.