Aditya Birla Group’s Novelis Inc., which is facing an anti-trust lawsuit in the US over its acquisition of Aleris Corp., expects to close the deal by 21 January—the outside date under the original merger agreement, said a top company official.
Last month, the US justice department filed a lawsuit to stop Novelis Inc.’s proposed $2.58 billion purchase of Aleris because of concerns over higher prices of aluminium sheet used to make cars. In its lawsuit, the justice department described Ohio-based Aleris as an “aggressive competitor” and said the deal will give Novelis, the US-based unit of Hindalco Industries Ltd, up to 60% of the projected domestic capacity.
“In the US, we have signed a consent decree with the Department of Justice,” said Satish Pai, managing director, Hindalco. “We will prove then through litigation and, if needed, the arbitration process, that aluminium and steel is one market (for the auto industry) in the US.”
Negotiations between Novelis and the justice department currently hinge on the rolling mill at Lewisport, Kentucky, and its 200 kilotonne (kt) automotive finishing line. Novelis has argued that the justice department’s lawsuit “ignores competition from steel automotive body sheet, even though steel automotive body sheet is currently used for nearly 90% of the market”.
On 1 October, the European Commission approved Novelis’ proposed acquisition of Aleris, a maker of aluminium rolled products, with 13 facilities across North America, Europe and China. The approval is conditional on the sale of Aleris’s plant in Duffel, Belgium, which produces aluminium for the automotive and specialities markets.
Pai said he expects to close the sale of the 180kt Duffel plant by November-end and that the company is in talks with a couple of interested local buyers. Regulatory approvals in China will be sought after the European Commission is satisfied with the plant sale and gives its final approval. Pai said the sale of the Duffel plant, and “the unlikely event that we will have to sell Lewisport” will bring down the cost of the Aleris acquisition proportionately.
The Lewisport plant has a 200kt auto facility and a 350kt hot strip mill. The Duffel plant, slated for sale, has an auto facility of 80kt and a 100kt capacity in specialities. Hindalco announced in July last year it would acquire Aleris through Novelis for $2.58 billion. Hindalco has arranged for $775 million of equity financing through a 5-year facility and a $1.5 billion of debt through a one-year bridge loan.
On Monday, Hindalco, which houses the metals business of the Aditya Birla group, reported a 33% fall in consolidated net profit in the September quarter. Weak metal prices led to an 8.4% fall in operating revenue to ₹3,918 crore from ₹4,276 crore a year earlier. Net profit was also hit by a one-time loss of ₹256 crore on the shutdown of a plant in Germany and restructuring expenses at Muri alumina refinery.
“We’re seeing the government is seized of the matter and are announcing a range of initiatives,” Pai said adding “We are hoping to see projects from Power Grid and orders from infrastructure, building and construction to pick up.”
Hindalco has cut its capital expenditure plans for the second time this year, from ₹2,600 crore to ₹2,000 crore.
September quarter revenue fell 9% to ₹29,657 crore on account of lower average base aluminium prices and local market premiums, partially offset by higher total shipments and favourable product price and mix.
Shares of Hindalco Industries fell 1.8% to ₹200.40 on BSE on Monday underperforming the benchmark index Sensex that remained almost unchanged at 40,345.08 points.
Source: Mint