Hindalco Industries Ltd has not received any official communication from the European Union (EU), approving its acquisition of aluminium maker Aleris Corp., chairman Kumar Mangalam Birla said, amid news report that a clearance from the EU is imminent.
Hindalco is not aware of any clearance yet, Birla said, addressing shareholders at the company’s annual general meeting (AGM) on Friday.
Last year, Hindalco announced its acquisition of Aleris at an enterprise value of $2.58 billion, through its US subsidiary Novelis Inc. The deal is awaiting regulatory approvals in the US, the EU and China. A Reuters report on 29 August said that Hindalco has offered to sell Aleris’s auto sheet manufacturing plant in Duffel, Belgium, as a concession to allay the European Commission’s (EC’s) worries that the deal may affect input prices of carmakers in the region.
On the sidelines of the AGM, Satish Pai, managing director and chief executive of Hindalco, declined to confirm these concessions, but said that the terms of the concessions will be announced when EC gives its final decision on the acquisition. He said the company expects to receive final approvals before the commission’s next scheduled meeting in October.
At the AGM, Birla allayed fears of shareholders about the cost of the Aleris acquisition. “The net debt-to-EBITDA ratio at Novelis has reduced from 3.1 times in FY17 to 2.65 times now. This will rise to 3.8 times post-acquisition but this will come down in two years and we believe it will generate enough cash flow to justify the acquisition. We’re very comfortable on debt. The rationale for the Aleris acquisition is to enhance our capacity in the auto market, enter the high-end aerospace market and backward-integrate our Chinese operations,” he said.
Hindalco has reaffirmed its plans to invest $1-1.2 billion over five-six years in the domestic aluminium business, added Birla. He, however, sounded a note of caution about a looming fall in world metals demand.
The company ramped down its initial capital expenditure plan in its domestic business for FY20 from ₹2,600 crore to ₹2,000 crore, the bulk of which will go into subsidiary Utkal Alumina International Ltd.
Source: Mint