hindalco

Merger & Acquisition(Hindalco &

Novelis)

Vaibhav L.Shilpa D.

Alok M.

The combining of two or more companies, generally by offering the stockholders of one company securities in the acquiring company in exchange for the surrender of their stock.

MERGER

When one company takes over another and clearly established itself as the new owner, the purchase is called an acquisition.

ACQUISITION

INTRODUCTIONTo

Company

HINDALCO

Structured into two strategic businesses Aluminium and Copper.

It enjoyed domestic market share of 42% In primary aluminium, 63 % in rolled products, 44 % in Foils & 31% in wheels.

Highly concentrated industry with only five primary plants in the country

Annual revenue of US $14 billion.

Product range includes alumina chemicals, wire rods, rolled products, foils and alloy.

SWOT ANALYSIS FOR HINDALCO

• Global brand image.

• Cost effective producer.

• Sound financial position.

• A high degree quality consciousness is the core competence of the

company, ISO 9001 and ISO 14001 have added more prestige to the

company.

• Company has a well-established distribution network, covering a

geographically wide and scattered market.

7

STRENGTH

• Present production capacity is not adequate to meet the rising high demand.

• Technology is not upgraded to mark as compare to global giants in aluminium industry.

8

WEAKNESS

•R & D collabratation with universities and another research organization.•More emphasis on downstream production of value added products.•Recycling should be adopted as routine production.•Raising more finance from marketing for more acquisition and merger.

OPPORTUNITY

• Innovative revolution in plastic and steel industry.• Reduce in Exide duty.• Fall in price of Al. In neighbour country.

9

THREATS

NOVELIS

It was born in early 2005. The $ 23.6-billion aluminium giant and Canada-based.

Novelis is the world leader in aluminium rolling, producing an estimated 19 percent of the world's flat-rolled aluminium products.

The company is No. 1 rolled products producer in Europe, South America and Asia, and the No. 2 producer in North America.

Objectives of Acquisition

• Higher profitability

• To gain access to global aluminium market and expand production capacity to keep pace with growing demand for aluminium.

• This merger of Novelis into Hindalco will establish a global integrated aluminium producer with low-cost alumina.

• Aluminium production facilities combined with high-end aluminium rolled product capabilities.

• After merger Hindalco will emerge as the biggest rolled aluminium products maker.

• fifth -largest integrated aluminium manufacturer in the world.

• Hindalco's position as one of the lowest cost producers of primary aluminium in the world is leverage able into becoming a globally strong player.

• The Novelis acquisition will give the company immediate scale and strong a global footprint.

• Cost of Acquisition lower than setting up a green field plant and marketing and distribution channel.

Objectives of Acquisition

INTRODUCTION

Indian Deal makers

• Team MembersKumar Mangalam BirlaDebu Bhattacharya, Managing Director, HindalcoSumant Sinha, Group CFO

• Announced on Feb, 11, 2007

• Negotiation went for 18 months.

• Approval of at least two thirds shareholders.

• Hindalco share plunged 13.74 per cent.

• All-cash transaction

• Aluminium producer with low-cost alumina.

• Fifth -largest integrated aluminium manufacturer in the world.

Deal structure

Divided into 2 parts-

1)100% of Novelis equity @44.93$ per share which add up to $3.6b

2)$2.4b debt on Novelis balance sheet

- No Option of Leverage buyout unlike TATA Corus

Conclusion

17

'We look upon the Aluminium business as a core business that has enormous growth potential in revenues and earnings,’

'Our vision is to be a premium metals major, global in size and reach .... The acquisition of Novelis is a step in this direction'

Mr. Kumar Mangalam Birla, Chairman,

Hindalco Industries.