Birla-owned Hindalco's subsidiary to acquire Aleris for $2.6bn
What's the story
Novelis, a subsidiary of Aditya Birla Group-owned Hindalco Industries limited, has agreed to buy US aluminium producer Aleris Corporation, thereby keeping Kumar Mangalam Birla's aggressive overseas expansion operations on track.
Novelis is said to have signed a definitive agreement to acquire Aleris for around $2.6bn, and the acquisition was announced by Kumar Mangalam Birla at a press conference today.
Here's more.
Why Aleris?
Aleris' acquisition seems to be a strategic move by Novelis
Novelis' acquisition of Aleris seems to be a strategic move.
With the deal, Novelis stands to get all of Aleris' 13 manufacturing facilities across North America, Asia, and Europe, thereby gaining capacity in high-end aerospace and automotive segments.
The combined entity will have a value of $15bn, will operate 37 facilities, and have an employee base of 16,500.
Quote
Novelis CEO Steve Fisher's two cents on the acquisition
"Acquiring Aleris is the right opportunity at the right time as they are set for transformational growth. The significant investments they've made in the high-demand, high-value aerospace and automotive segments have resulted in favorable long-term, global contracts," said Novelis CEO and President Steve Fisher.
Particulars
Details about how the deal adds to Novelis' capacity
In particular, Aleris' recently commissioned and already functioning $425mn automotive body sheet (ABS) unit in Kentucky will allow Novelis to add capacity in this segment quickly.
Additionally, the acquisition would add 1 million tonnes to Novelis' extant 3.6 million tonne aluminium production capacity.
On top of that, the deal will allow Novelis to expand its presence in Europe and North America.
Product mix
The deal will help Novelis diversify its products
Currently, 60% of Novelis' total output comes from the production of beverage cans, while 18% and 10% come from automotive and speciality segments respectively.
On the other hand, Aleris' product mix consists of construction in North America (24%), distribution (22%), aerospace (14%), automotives (13%), heat exchangers (9%), truck trailers (8%), and others.
Understandably, the deal would allow Novelis to delve into different segments.