Hindalco Industries Ltd. has completed the acquisition of Aleris Corporation by its wholly owned subsidiary Novelis Inc. for an enterprise value of $2.8 billion.
The acquisition of the U.S.-based rolled products company, Aleris Corporation, positions Hindalco Industries as one of the world’s largest aluminium companies, with a global footprint spanning 49 manufacturing facilities in North America, Europe and Asia.
“The Aleris deal marks a major milestone for Hindalco and Novelis, on their path to global leadership. The closure of this deal amidst 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,” said Kumar Mangalam Birla, chairman, Aditya Birla Group.
“The Aleris deal, crucially enables the further diversification of our metals downstream portfolio, into other premium market segments, most notably aerospace. Through the creation of an industry champion, we are reinforcing our commitment to our customers, employees and shareholders. At the same time,With this further expansion in our aluminium portfolio, we have taken a decisive step towards a more sustainable future, ” according to Mr. Birla.
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.
“The Aleris acquisition takes forward our aluminium value-added products strategy and gives us 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 U.S. and Europe as well. I thank the team for closing this important deal,” said Mr. Satish Pai, Managing Director of Hindalco Industries.
Beyond its many strategic benefits, the acquisition will generate approximately $150 million in synergies and creates a strong financial profile.
In addition, combined net debt to Adjusted EBITDA of approximately 3.3x is within the recently updated guidance of below 3.5x and well below the initial outlook of below 4x at transaction announcement.
The closing purchase price of $2.8 billion consists of $775 million for the equity value, as well as approximately $2 billion for the assumption or extinguishment of Aleris’ current outstanding debt and a $50 million 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’ U.S. business.
On a trailing twelve-month basis ending December 31, 2019, legacy standalone Aleris Adjusted EBITDA stood at $388 million, higher than that estimated at the time of deal announcement.
“Despite the increase in legacy Aleris debt, the implied enterprise value multiple of 7.2x, is in line with our acquisition case, on account of better EBITDA performance,” said the Aditya Birla Group metals flagship company in a statement.
“Today is a transformational moment in our company’s history, and I’ve never been more confident in our ability to deliver even more value to our customers, colleagues and the communities where we live and work,” said Mr. Steve Fisher, President and CEO, Novelis Inc. “With a world-class workforce, a presence in the most competitive and technically demanding end-markets, and the ability to deliver rapid, adaptive and sustainable solutions, Novelis will be able to even better serve our customers.”
“Novelis will acquire Aleris’ 13 plants across North America, Europe and Asia; however, to satisfy regulatory conditions, the company is required to divest Aleris’ plants in Lewisport, Kentucky, U.S.A., and Duffel, Belgium, as announced earlier,” said the statement.
