Hindalco's Acquisition of Novelis
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Case Details:
Case Code : BSTR265
Case Length : 17 Pages
Period : 1991 - 2007
Pub Date : 2007
Teaching Note :Not Available
Organization : Hindalco, Novelis
Industry : Aluminum
Countries : US, Canada
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Please note:
This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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"The acquisition will catapult the group into the Fortune
500 league, three years ahead of the target. The combination of Hindalco and
Novelis will establish a global integrated aluminium producer."1
- Kumar Mangalam Birla, Chairman of Hindalco, in February
2007.
"The combination of Novelis's world-class rolling assets
with Hindalco's growing primary aluminum operations and its downstream
fabricating assets in the rapidly growing Asian market is an exciting prospect."2
- Ed Blechschmidt, Acting Chief Executive of Novelis, in
February 2007.
Introduction
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On May 16, 2007, India-based Hindalco Industries Limited (Hindalco), a
subsidiary of the AV (Aditya Vikram) Birla Group of Companies (Aditya Birla
Group), acquired the US-Canadian aluminum giant Novelis Inc. (Novelis).
The acquisition was the result of an agreement arrived at between Hindalco and
Novelis on February 10, 2007. Hindalco was to buy Novelis for US$ 6 billion in
cash, making it the second biggest acquisition3
by an Indian company till then. Novelis was to operate as a subsidiary of
Hindalco, and was to have Kumar Mangalam Birla (Kumar Mangalam) as Chairman who
was also the Chairman of Hindalco and the Aditya Birla Group.
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Martha Finn Brooks, from Novelis would continue as Chief
Operating Officer and was also appointed as the President of the merged entity.
Hindalco was among the leading companies in the aluminum and copper industry in
the world. (Refer to Exhibit I for leading aluminum companies in the world based
on EBITDA figures).
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In the financial year 2006-07, Hindalco generated
revenues of US$ 14 billion and the company had a market capitalization
of more than US$ 4.5 billion. It had a significant market share in all
the segments in which it operated and enjoyed a domestic market share of
42 percent in primary aluminum, 63 percent in rolled products, 20
percent in extrusions, 44 percent in foils, and 31 percent in wheels
(Refer to Exhibit II for Hindalco's revenues and net income for the year
2006 and 2005). Novelis had a three million ton capacity for
manufacturing value added aluminum rolled products4
and was a leading producer of aluminum sheet and light gauge (thin)
rolled products for the construction and industrial markets. |
Hindalco's Acquisition of Novelis
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