A V 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.
Hindalco on Sunday 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.
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.
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 or Rs 20.25 billion) from its treasury operations. Hindalco had last week encashed investments in liquid schemes of mutual funds of over Rs 2,000 crore (Rs 20 billion).
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.
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.
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.
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.
