Hindalco gains by nearly 5 per cent on completion of acquisition

Hindalco announced that the company’s wholly-owned subsidiary Novelis Inc. has completed the acquisition of US-based rolled products major, Aleris Corporation. Post this development, the stock of the company gained by nearly five per cent.

The deal is said to have been closed at an enterprise value of USD 2.8 billion with EV multiple at an attractive 7.2x. The purchase price includes USD 775 million for the equity value and around USD 2 billion for the assumption or extinguishment of Aleris’ current outstanding debt as well as USD 50 million earn-out payment. In the current economic downturn, the completion of this deal is very beneficial for Hindalco-Novelis. The addition of Aleris’ operational assets and its workforce enabled Novelis to efficiently serve the growing Asia market by integrating complementary assets in the region including recycling, casting, rolling and finishing capabilities. Hence, potential synergy benefits are expected to be around USD 150 million on recurring basis. Aleris acquisition helps Hindalco in implementing its aluminium value-added products strategy and also gives it entry into high-end aerospace. The company also gains access to Aleris’ modern Zhenjiang facility in China. Further, this partnership also insulates Hindalco-Novelis from global price volatility and aids in sharpening the company’s focus on the downstream business.

On Wednesday, the stock of the company was trading at Rs 119.30, up by 4.83 per cent or Rs 5.50 per share. The 52-week high is Rs 221.20 and 52-week low is Rs 85.05 on BSE.