India's Hindalco to buy US-based Novelis for 6 billion

MUMBAI - India's largest aluminium producer, Hindalco Industries, announced it was buying the US-based firm Novelis for six billion dollars in the latest big-bucks foreign takeover by an Indian firm.

The all-cash deal follows Tata Steel's 7.0-billion-pound buyout last month of Anglo-Dutch producer Corus, the largest-ever foreign acquisition by an Indian company.

That deal showcased the increasing financial firepower of Indian firms being driven by nine percent growth rates.

"This is India's largest acquisition of a North American company and will catapult us into a Fortune 500 companies list," said Kumar Mangalam Birla, chairman of Aditya Birla conglomerate, which owns Hindalco.

He said the transaction was expected to be finalised in the second quarter and included 2.4 billion dollars of debt. It requires the support of two-thirds of Novelis shareholders and approval under Canadian law.

The firm is offering 44.93 dollars a share, a premium of almost 17 percent over Novelis' stock close of 38.5 on Friday.

Novelis is a leader in aluminium products across Europe and Asia, with a presence across 11 countries and employing 12,500 people. Its customers include US auto giant General Motors and soft-drinks mammoth Coca-Cola.

Birla said the group's sales were expected to nearly double to 20 billion dollars from the current 11.8 billion dollars.

"We plan to retain all Novelis employees and see strong synergies across products, with an edge in research," Birla told reporters. "Though Novelis will be a wholly owned subsidiary, we have no plans to merge it into Hindalco."

The deal will create a global integrated aluminium producer providing low-cost raw materials and production capabilities, Birla said.

Post-acquisition, the Birla group will have 50 percent of its turnover coming from overseas.

Hindalco closed at 173.25 rupees last Friday at the Mumbai stock exchange, having gained nearly three percent in the past month on media reports of a possible buyout of Novelis, an Atlanta-based company spun-off from Canada's Alcan.

"A key positive from the deal is that Novelis' products are insulated against economic cycles. There will be stable cash flows going ahead," a senior company official said.

Hindalco company officials also said product synergies and geographical reach were huge.

"Novelis has a global market share of 19 percent for aluminium rolled products. Hindalco's global share will improve in the high-growth Indian market for rolled products," said Debu Bhattacharya, managing director of Hindalco.

Ed Blechschmidt, acting chief executive officer of Novelis, said in a statement on the company's website that the deal represented "outstanding value".

"The board has agreed that the transaction with Hindalco delivers outstanding value to Novelis shareholders," the statement said.

"The combination of Novelis' world class products with Hindalco's downstream assets in a rapidly growing Asian market is an exciting prospect," it added.

Novelis reported a loss of 102 million dollars in its third quarter earnings in November last year. In 2005, the company reported net sales of 8.4 billion dollars, according to the company's website.