| AV Metals — the A V Birla group’s Canada-based special purpose vehicle — will infuse $3.5 billion to finance Hindalco Industries’ proposed acquisition of the Atlanta-based aluminium downstream major Novelis Inc.
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| Hindalco yesterday announced its plans to buy out Novelis for an enterprise value of nearly $6 billion. Putting aside the $2.4 billion debt burden of Novelis, the cash component for financing the deal stands at $3.5 billion.
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| Of this amount, A V Metals will take loans worth $2.8 billion from three financial institutions, namely UBS, ABN Amro and Bank of America. This includes a bridge loan of $1.4 billion at a coupon rate of 7.2 per cent. These three institutions have underwritten the debt amount with UBS taking care of the majority portion. UBS is the financial advisor to Hindalco.
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| Essel Mining & Industries, a closely held company of the group, will bring in $300 million while Hindalco will mobilise $450 million (Rs 2,025 crore) from its treasury operations. Hindalco had last week encashed investments in liquid schemes of mutual funds of over Rs 2,000 crore.
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| The terms of agreement signed between Novelis and Hindalco envisage that the later will pay $44.93 a share, amounting $3.5 billion. Hindalco aims to acquire 100 per cent of Novelis.
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| As per Canadian law, if it gets 66.6 per cent of the equity capital of Novelis, it can automatically buy the remaining shares at the same price.
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| It seems there is no possibility of other bidders. In case a third party bids now, Hindalco will get $100 million as break-up fee.
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| Novelis, which was spun off from Alcan two years ago, is the global leader in aluminium rolled products and aluminium can recycling. The company operates in 11 countries and has $10 billion of revenues. It has 12,500 employees in 11 countries. Novelis produces 19 per cent of the world’s flat rolled aluminium products. |
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