Aditya Birla set for $5 bn Novelis bid

The giant conglomerate is seriously exploring the possibility of acquiring Novelis Inc, reports Arun Kumar.

After steel, it is alumnium's turn. And after Ratan Tata, it is Kumar Mangalam Birla who is set for a multi-billion-dollar global takeover bid. 

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Even as the Tata group is locked in a  sew-saw battle to wrest Anglo-Dutch steel maker Corus, the Aditya Vikram Birla group, a giant conglomerate much like the Tatas, is seriously exploring the possibility of acquiring Novelis Inc, one of the leading aluminum companies of North America.

According to highly placed sources, the deal size would be in the vicinity of $5 and 6 billion. The sources said that the group has completed preliminary due diligence and is expected to submit its bid shortly, with management support of the widely-held company.

Sources in the investment banking industry said the acquisition of Novelis, a Toronto and New York-listed company spun off from Canadian aluminum major Alcan, will make the AVB group's Hindalco Industries Ltd the world's largest player in the downstream aluminium business involving value-added products.

Alcan's downstream business was separated in 2004 and shareholders were issued proportionate shares in the new company. The new entity was listed on the New York Stock Exchange and the Toronto Stock Exchange. At the time of listing, Novelis had revenues of $6.2 billion. Hindalco had acquired Alcan's Indian subsidiary Indal nearly a decade ago, making the AVB company the leader in value-added products.

Market trends show that there are three aluminium corporates that are up for grab in North America - Norsk Hydro, Allares and Novalis. "Norsk Hydro is a much bigger company and it would be difficult to consummate a transaction of this magnitude, while  Allares has been acquired only last year by a private equity firm - the Texas Pacific Group (TPG)," a banker said.

An AVB Group spokeswoman declined comment. "We do not wish to comment on speculative news," she said. Hindalco, which has a strong balance-sheet, is likely to aid a leveraged buyout in line with the prevailing market trend under which acquirers use the acquired company's assets to raise cash to effect the purchase.

"In such a scenario, Hindalco will not be required to commit the entire deal amount," one investment banker said.

Novelis is a world leader in continuous casting technology and has highly automated facilities. It is the global leader in rolled aluminum. Novelis has 38 plants in 12 countries. Of the total revenues of $6.2 billion in 2004, its income from the North America was $2.4 billion, and from Europe $2.5 billion, while rest came from South America and Asia.

E-mail Arun Kumar: arunkumar@hindustantimes.com