Aditya Birla’s Hindalco Completes Acquisition of Aleris

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Aditya Birla Group’s Hindalco Industries Ltd announced the completion of acquiring Aleris by its wholly-owned subsidiary Novelis Inc.

The acquisition of the US-based rolled products major Aleris Corporation positions Hindalco as one of the world’s largest aluminium companies with a global footprint spanning 49 modern manufacturing facilities in North America, Europe and Asia.

The closing purchase price of 2.8 billion dollars consists of 775 million dollars for the equity value as well as two billion dollars for the assumption or extinguishment of Aleris’ current outstanding debt and a 50 million dollars earn-out payment.

Legacy Aleris debt levels have increased since the initial acquisition announcement due to rise in working capital to support the ramp-up of operations while the earn-out is related to stronger than expected performance by Aleris’ US business.

“The Aleris deal marks a major milestone for Hindalco and Novelis on their path to global leadership,” said Chairman of Aditya Birla Group Kumar Mangalam Birla in a statement.

“The closure of this deal amid challenging market conditions reflects our conviction in the Aleris business and its value to our metals portfolio. Periods of turmoil have historically seen the emergence of champions powered by quality leadership and sound business fundamentals. This is a long-term strategic bet, much like Novelis was in 2007,” he said.

Birla said the Aleris deal crucially enables further diversification of the metals downstream portfolio into other premium market segments, most notably aerospace. “With this further expansion in our aluminium portfolio, we have taken a decisive step towards a more sustainable future.”

With the addition of Aleris’ operational assets and workforce, Novelis is poised to more efficiently serve the growing Asia market by integrating complementary assets in the region including recycling, casting, rolling and finishing capabilities.

Managing Director of Hindalco Industries Satish Pai said the Aleris acquisition takes forward the company’s aluminium value-added products strategy and gives it entry into high-end aerospace. It further insulates Hindalco-Novelis from global price volatility and sharpens our focus on the downstream business.

“Aleris enhances our strategic position in Asia and also solidifies our position as a leading global metals player with a stronger presence across the United States and Europe as well,” said Pai.

Beyond its many strategic benefits, the acquisition will generate 150 million dollars in synergies and creates a strong financial profile. In addition, combined net debt to adjusted EBITDA of 3.3 times is within the recently updated guidance of below 3.5 times and well below the initial outlook of below 4 times at transaction announcement.

On a trailing 12-month basis ending December 31, 2019, legacy standalone Aleris adjusted EBITDA stood at 388 million dollars, higher than that estimated at the time of deal announcement. Despite the increase in legacy Aleris debt, the implied enterprise value multiple of 7.2 times is in line with the acquisition case on account of better EBITDA performance.

An 18.7 dollar billion metals powerhouse, Hindalco is the world’s largest aluminium rolling and recycling company, and a major copper player. It is also one of Asia’s largest producers of primary aluminium.

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