Aditya Birla group’s Novelis Inc, a subsidiary of Hindalco, has agreed to purchase US-based Aleris Corporation, a global aluminium rolled products major, for $2.58 billion in a debt finance deal.
Novelis will take over 13 production facilities in North America, Europe and Asia as part of the acquisition.
Kumar Mangalam Birla, chairman of Aditya Birla, said the deal will include $775 million of equity and $1.8 billion of debt which will be funded through Novelis, The acquisition will give the Birla group an entry into the aerospace sector and a higher customer base in the car industry.
“Post this acquisition, we are well placed to serve our customers across geographies in automotive and now the high-end aerospace segments. We will have presence throughout the downstream aluminium value chain in Asia, positioning us for future growth in the region,” he said.
From a footprint perspective, Cleveland-headquartered Aleris has a wide base of manufacturing locations, he said. Aleris has invested approximately $900 million in the last few years in the automotive and aerospace businesses. “The ramp-up of these capacities in the near-term will significantly bolster Novelis’ growth across regions and market segments. As a result, Novelis will have a further diversified business portfolio across regions, segments and customers,” Birla said.
According to him, Aleris is the market leader in the B&C segment in the US, driven mainly by its unique recycling enabled continuous cast technology at Uhrichsville and other plants in the US. “This is traditionally a highly competitive market segment, but Aleris’ quality and responsiveness has helped it sustain leadership in these markets over the years,” he said.
Aleris is in early stages of ramping up its automotive investments in Lewisport, US. This plant draws its technological and manufacturing expertise in automotive from the well-established auto plant in Duffel, Belgium. This ramping up of asset overcomes the time lag for Novelis to build new plants and helps it serve customers in the fast growing US aluminium automotive market, Novelis said.
Consolidated revenues will be at approximately $21 billion with an employee base of around 40,000. This acquisition of Aleris by Novelis is subject to customary closing conditions and regulatory approvals. Aleris is a privately held company and is amongst the leading producers in aluminium rolled products globally.
“The Indian aluminium market is at the cusp of growth given the evolving state of per capita GDP versus Aluminium consumption in the country — similar exponential growth was witnessed in China a decade ago. In these early stages of growth and fuelled by the government’s Make-in-India campaign, segments like B&C and transportation are likely to grow significantly,” he said.
Given its synergy with Novelis, Hindalco has become the market leader in aluminium value added products in India and is poised to capture this growth in the future. Further, Aleris’ expertise in this segment will give Hindalco’s India Aluminium value added products business an edge over local competition while enabling it to compete with global players foraying into the Indian market.