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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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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Excerpts Contd...
Rationale for Acquisition
After the deal was signed for the acquisition of Novelis, Hindalco's management
issued press releases claiming that the acquisition would further
internationalize its operations and increase the company's global presence. By
acquiring Novelis, Hindalco aimed to achieve its long-held ambition of becoming
the world's leading producer of aluminum flat rolled products. Hindalco had
developed long-term strategies for expanding its operations globally and this
acquisition was a part of it. Novelis was the leader in producing rolled
products in the Asia-Pacific, Europe, and South America and was the second
largest company in North America in aluminum recycling, metal solidification and
in rolling technologies worldwide.
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ovelis had the most modern technology in the industry and
efficiently produced high-quality products in several countries across the
world...
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The Pitfalls
Though the Hindalco-Novelis merger had many synergies, some analysts
raised the issue of valuation of the deal as Novelis was not a
profit-making company and had a debt of US$ 2.4 billion. They opined
that the acquisition deal was over-valued as the valuation was done on
Novelis' financials for the year 2005 and not on the financials of 2006
in which the company had reported losses (Refer to Exhibit IX for Novelis P&L statements and balance sheets). They said that Hindalco
might have to collect a huge amount of resources to revive and
restructure Novelis... |
Exhibits
Exhibit I: Leading Aluminum Companies in the World Exhibit IIA: Income Statement of Hindalco Exhibit IIB: Balance Sheet of Hindalco Exhibit III: Performance of Novelis in Different Regions Exhibit IV: Novelis - Stock Price Chart (January 2005 - May 2007) Exhibit IV (Contd.): Hindalco - Stock Price Chart (December 2006 - May 2007) Exhibit V: Other Businesses of Aditya Birla Group Exhibit VI: Aluminum Industry in India Exhibit VII: Novelis Operating Segments Exhibit VIII: Alumina and Aluminum Prices (2004-07) Exhibit IX (A): Novelis Selected Financial Data Exhibit IX (B): Consolidated Balance Sheet of Novelis
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