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Hindalco-Aleris deal awaits regulatory nods

FE Bureau
Hindalco Industries, Aleris Corporation, US, EU, Kumar Mangalam Birla, Germany, European Commission, Novelis, Utkal Alumina refinery

Hindalco Industries is still awaiting regulatory approvals for the $2.58-billion acquisition of Aleris Corporation by government authorities of US, EU and China. The acquisition is subject to customary closing conditions along with regulatory approvals, the company’s chairman Kumar Mangalam Birla said at the company’s 60th annual general meeting held in Mumbai on Friday.

In July 2018, Hindalco’s Canadian subsidiary, Novelis, announced the acquisition of US-based aluminium rolled products major, Aleris, for an enterprise value of $2.58 billion. Once completed, the acquisition, will create a $21-billion company by revenue, and will mark Novelis’ foray into high-end technology driven aerospace segment with technological capabilities in manufacturing and research and development in Aleris’ facility in Germany.

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However, in May 2019, the European Commission had “stopped the clock” on its in-depth investigation into Novelis’ proposed acquisition of Aleris as it raised concerns that customers would face a reduced choice in suppliers, as well as higher prices for ABS. The EC was also investigating whether the transaction could have an effect on the supply and prices of certain aluminium flat rolled products. Hindalco management has called this step by the Commission as routine and had reiterated that the deal is on track and will complete by the third quarter of the current financial year.

Meanwhile, according to some media reports on Friday, Novelis has agreed to sell Aleris’ Belgian plant to address the European Commission’s worries and that it is set to secure the European Union antitrust approval for the deal. The EC is scheduled to decide on the case by October 7, 2019.

Speaking at the AGM, Birla said that in FY19, Hindalco has prepaid Rs 1,575 crore of long-term project loans in India. This has led to an improvement in the consolidated net debt to Ebitda, which stood at 2.48x as on March 31, 2019. Birla said the company has a focus on strengthening the balance sheet through allocation of capex towards growth strategies and generating positive free cash flows.

“The company aims to double the share of value-added products in the domestic aluminium business over the next 5-6 years with an investment of around $1-1.2 billion in India. We will expand our alumina capacities with an expansion of Utkal Alumina refinery by 500Kt, to be commissioned by FY21,” he said. In the copper business, he said, the newly commissioned continuous copper plant CCR-3 is ramping up well. With this, Hindalco’s rod capacity has risen 71% in FY19, from the earlier 41%.