Though Hindalco has sealed its Rs 27,000 crore deal to acquire Novelis, it doesn't want a new bidder to enter the ring and give it a nasty surprise. So under the deal that the Birlas have signed with Novelis, the latter has to pay a breakage fee of $100 million to Hindalco to accept another party as a bidder.
Recently, Brazilian steelmaker CSN had sprung a surprise on the Tatas by making a competitive bid for Corus. Hindalco isn't taking any chances. The Birlas have agreed to pay $44.93 in cash per share as compared to the Novelis' stock close price of $38.5 on Friday, a premium of 15 per cent. In case a rejected bidder decides to enter the fray, then he has to quote a higher amount.
The Tatas who had almost finalised their deal at 455 pence per Corus share had to increase their initial offer to 500 pence per share, the moment CSN entered the fray by quoting a bid of 515 pence per Corus share. The Tatas finally won by agreeing to pay 608 pence per share.
But Aditya Birla Group chairman Kumar Mangalam Birla does not expect such a situation. Birla said, "The Novelis board has declared us as the highest bidder. We don't know who the others in the race were and how much they bid for. There is a possibility of somebody coming in (for a counter bid) but frankly, we don't expect it."
Hindalco managing director Debu Bhattacharya said, "There is a ring-fence in case somebody comes after us. If that happens, Novelis has to pay us 100 million dollars as breakage fee, which is equivalent to 1.5 dollars per share. Besides, it has to pay a premium, making it five dollars more per share, which is not easy."
The acquisition is expected to complete by June 2007. It will require the approval of 66.66 per cent of votes cast by Novelis shareholders followed by court approval.
Email Lalatendu Mishra: email@example.com