plans to take over Alcan
Indian aluminum and copper producer Hindalco Industries Ltd. announced Sunday it plans to take over aluminum producer and Alcan Inc. (TSX:AL) spinoff Novelis Inc. (TSX:NVL) for US$6 billion.
The all-cash friendly acquisition worth about US$44.93 a share would make Hindalco the largest rolled-aluminum products manufacturer in the world, a company statement said.
The planned Hindalco takeover comes less than two weeks after India's Tata Steel won a bidding war for European steel maker Corus Group PLC when its US$11.3-billion offer topped a bid by a Brazilian company.
Hindalco is the flagship company of the Indian conglomerate, the Aditya Birla Group with interests in cement, metals, telecommunication and textiles.
The acquisition is subject to some regulatory approvals and is likely to be completed by the second quarter of 2007, Hindalco said.
The merger continues a wave of consolidation in the global metals industry that has already seen the takeover of Canadian steel giant Dofasco by Europe's Arcelor, which itself was acquired by Mittal Steel.
Alcan spun off Novelis into a separate company after acquiring France's Pechiney SA about three years ago in a deal that made the Canadian aluminum giant, which has smelters in Quebec and B.C., one of the world's biggest primary metals producers.
"The combination of Novelis' rolling assets with Hindalco's growing primary aluminum operations and its downstream fabricating assets in the rapidly growing Asian market is an exciting prospect," Ed Blechschmidt, Novelis's acting chief executive said in the Hindalco statement.
Hindalco would take over Novelis' debt of US$2.4 billion, which would be included in the purchase price, the statement said.
"The acquisition is in keeping with our strategy of expanding our global presence," billionaire Kumar Mangalam Birla, chairman of the Aditya Birla Group, told reporters in Mumbai. "We are very excited ... The chemistry between the teams of Hindalco and Novelis has worked very well."
Birla said there were no immediate plans to merge the companies.
"There is no real advantage of merging it as of now," he said. "There are no plans for the foreseeable future, but I can't say we would never merge."
Novelis manufactures aluminum sheet used in cars and construction, recycles aluminum cans and supplies industries ranging from auto and transportation to beverage, food packaging, machinery and printing. The company employs about 12,500 people in 11 countries and had a loss of US$170 million in the nine months ended Sept. 30.
Atlanta-based Novelis has been restructuring some operations to improve its finances in the wake of its spinoff by Alcan, the Montreal-based metals giant that is a major customer of Novelis.
Alcan was required to divest the Novelis operations to satisfy regulators' competition concerns after the Canadian company bought France's Pechiney SA in a multibillion-dollar takeover in early 2004.
Novelis shares soared late last month after the aluminum products company said it was in discussions with "various parties" that could lead to a sale.
The company's statement on Jan. 26 came in the wake of a report in a major Indian newspaper that the Aditya Birla Group might try to acquire Novelis in a bid that could reach US$6 billion.
Birla said Sunday that Hindalco was comfortably placed in terms of financing the deal, but did not give details. "It (Novelis) has high debt but that will start to come down. It is a profitable company and will be a profitable company going forward."
Hindalco's managing director Debu Bhattacharya said Hindalco would have taken a decade to build the assets that Novelis possessed. The company has 36 manufacturing facilities in 11 countries.
Bhattacharya said it was unlikely another bid would top Hindalco's offer.
"We do have an agreement with the board of directors at Novelis," he said, adding that if a new bid was entertained Hindalco would get a termination fee of US$100 million.
In Friday trading on the Toronto Stock Exchange, Novelis shares dropped $1.17 to close at C$45.07, while Alcan was down 57 cents to C$60.62.