Novelis Inc., a leader in aluminum rolling and recycling, has completed its acquisition of Aleris Corporation, a global supplier of rolled aluminum products.
“The Aleris deal marks a major milestone for Novelis, on its path to global leadership. The closure of this deal amidst challenging market conditions, reflects our conviction in the Aleris business and its value to our metals portfolio. Periods of turmoil have historically seen the emergence of champions, powered by quality leadership and sound business fundamentals. This is a long- term strategic bet, much like Novelis was in 2007,” said Kumar Mangalam Birla, chairman Aditya Birla Group and Novelis Inc. “The Aleris deal crucially enables the further diversification of our metals portfolio into other premium market segments, most notably aerospace. Through the creation of an industry champion, we are reinforcing our commitment to our customers, employees and shareholders. At the same time, with this further expansion in our aluminum portfolio, we have taken a decisive step towards a more sustainable future.”
With the addition of Aleris’ operational assets and workforce, Novelis is poised to more efficiently serve the growing Asia market by integrating complementary assets in the region including recycling, casting, rolling and finishing capabilities.
Beyond its many strategic benefits, the acquisition will generate approximately $150 million in synergies and creates a strong financial profile. In addition, combined net debt to adjusted EBITDA of approximately 3.3x is within the recently updated guidance of below 3.5x and well below the initial outlook of below 4x when the transaction was announced.
The closing purchase price of $2.8 billion consists of $775 million for the equity value, as well as approximately $2.0 billion for the assumption or extinguishment of Aleris’ current outstanding debt and a $50 million earn-out payment. Legacy Aleris debt levels have increased since the initial acquisition announcement due to rise in working capital to support the ramp up of operations, while the earn-out is related to stronger than expected performance by Aleris’ U.S. business. On a trailing 12 month basis ending December 31, 2019, standalone Aleris Adjusted EBITDA stood at $388 million, higher than that estimated at the time of deal announcement. Despite increased legacy debt, the implied enterprise value multiple of 7.2x, is in line with the acquisition case, on account of better EBITDA performance.
Novelis will acquire Aleris’ 13 plants across North America, Europe and Asia; however, to satisfy regulatory conditions, the company is required to divest Aleris’ plants in Lewisport, Kentucky.
Published in the May 2020 Edition