Close on the heels of the Tatas acquiring Anglo-Dutch steelmaker Corus Group in a $12.1 billion deal, India's corporate sector made another gigantic overseas acquisition on Sunday. Hindalco, the flagship metal company of the Aditya Birla Group, bought Atlanta-based Novelis Inc, the world's leading producer of aluminium rolled products, for an enterprise value of $6 billion (Rs 27,000 crore).
That such a deal was in the offing was first reported by the Hindustan Times on January 26.
With this transaction, which is expected to be completed in the second quarter of 2007, Hindalco will be the world's largest aluminium rolling company, one of the biggest producers of primary aluminum in Asia and India's leading copper producer.
"The acquisition of Novelis is a landmark transaction for Hindalco and our group," said Kumar Mangalam Birla, chairman, AV Birla group. "It is in line with our long-term strategy of expanding our global presence across our various businesses and is consistent with our vision of taking India to the world."
Spun off from Canadian giant Alcan Inc, Novelis has 38 plants in 12 countries.
Currently, Novelis has 75.4 million outstanding diluted shares. At the rate of $44.93 a share, the equity transaction is being valued at $3.39 billion. The company has a debt of around $2.4 billion, adding up to a total enterprise valuation of $ 5.89 billion. Hindalco sources, however, peg its value at a full $6 billion.
UBS Investment Banking were Hindalco's financial advisers for the deal, while the funding was arranged by UBS and ABN Amro Bank.
In a leveraged buyout, Novelis shareholders will receive $44.93 for every share. The transaction needs the approval of 66.66 per cent of the shareholder votes.
A meeting of Novelis shareholders will be called after court approval for the acquisition is secured.
Hindalco needs to fork out around $2 billion towards the equity capital of the special purpose vehicle (SPV) that will be created for the acquisition. The balance amount will be raised through non-recourse loans.