Novelis sells 50% stakes of Ulsan facility to Japan's Kobe Steel at $315 mn

JV will see transaction closure in September 2017

US-based Novelis on Wednesday announced that it has sold off 50 per cent of its stake in South Korea's Ulsan facility to Japan's Kobe Steel for $315 million to form a joint venture with the Japanese producer of aluminium rolled products.

The joint venture, which is to be named Ulsan Aluminum, will have both companies taking responsibility for its metal supply and commercial relationships, Novelis said in a release on Wednesday. The joint venture transaction is expected to close in September, subject to customary closing conditions, the statement added.

Novelis is a wholly-owned subsidiary of Aditya Birla Group's flagship company Hindalco Industries.

By entering into this joint venture, Novelis will able to utilise its rolling capacity at Ulsan better. The plant itself will continue to focus on automotive and specialty sheet in order to meet the increasing demand for lightweight rolled aluminium products across Asia, said the release. Partnering with another world-class manufacturing company will allow Novelis to drive operational efficiencies and process enhancements. As a result, Novelis' Ulsan facility, along with its Yeongju facility in South Korea and its Changzhou facility in China, will be better positioned to deliver innovative, value-added products and services to customers. The transaction will generate cash proceeds to enhance Novelis' strategic flexibility and reduce its net debt.

According to the release, the company continues to identify business opportunities across the globe even while idetifying Asia as a strategic market. 

"By entering into this joint venture, we are able to leverage our deep experience with other successful joint ventures to serve our customers more efficiently and increase our strategic flexibility in order to capitalise on potential future market opportunities," said Steve Fisher, president and chief executive officer at Novelis.

Located in the industrial hub of South Korea, Novelis' Ulsan facility employs approximately 600 people and focuses on the production of rolled aluminium sheet for a variety of markets in Asia. The plant recently completed a major expansion, adding a new three-stand hot finishing mill as well as a pusher furnace and annealing furnaces.