Q1-Identify and outlined the strategic alliances that have been adopted in the alliance under the

study? Give brief history of why the strategic alliance was initiated.

The strategic alliance adopted by Hindalco and Novelis is acquisition

Hindalco has completed this acquisition through its wholly-owned subsidiary

AV Metals Inc and has acquired 75.415 common shares of Novelis,
representing 100 percent of the issued and outstanding common shares AV
Metals Inc transferred the common shares of Novelis to its wholly-owned
subsidiary AV Aluminium Inc.

Hindalco had announced the acquisition of Novelis (a manufacturer of aluminium rolled

products and are cycler of aluminium cans with a global market share of about 19%) at $44.93 a
share for cash (approx. $5.77bn, including $2.45bn in debt). The deal and its impact on Hindalco
are.

Acquisition Details
Offer Price) (all cash 44.93 $ a share)
EV ($ m) 5,771
Debt ($ m) 2,446
Equity Value 3,325
No. of Shares (m) 75.415

The acquisition was financed by cash from Hindalco’s treasury of $450m and through debt of
$2.8bn.mOf the debt to be raised, $300m would be raised in the books of one of its subsidiaries

Hindalco Industries Ltd had completed its acquisition of Novelis Inc under an
agreement in which Novelis will operate as a subsidiary of Hindalco.

This strategic alliance was initiated because

• Hindalco will be able to ship primary aluminium from India and make
value-added products.
• The combination of Hindalco and Novelis establishes an integrated
producer with low-cost alumina and aluminium facilities combined with
high-end rolling capabilities and a global footprint.
• Hindalco’s rationale for the acquisition was increasing scale of
operation, entry into high end downstream market and enhancing
global presence.
• Novelis is the global leader (in terms of volume) in rolled products with
annual production capacity of 2.8 million tonnes and a market share of
19 per cent. It has presence in 11 countries and provides sheets and
foils to automotive and transportation, beverage and food packaging,
construction and industrial, and printing markets.
• Acquiring Novelis will provide Aditya Birla Group's Hindalco with access
to customers such as General Motors Corp. and Coca-Cola Co.
• Hindalco, fueled by accelerating domestic growth, was seeking
acquisitions overseas to add production capacity and find markets for
its products. Hindalco has 220,000 tonne of capacity.
• Acquisition gave Hindalco access to higher-end products but also to
superior technology.
• Hindalco planed to triple aluminium output to 1.5 million metric tonne
by 2012 to become one of the world's five largest producers. Was the
world's 13th-largest aluminium maker.
Q2- Look on growth path of companies amalgamating considering the following component

Share Price movement

Shareholder patterns
Alliance (Acquisition/Merger/JVs)

As far as present condition the acquisition is not found up as an successful one as Novelies has
hit the impairment of goodwill which has created up a loss of 1.8 billion in the books of
Handalco And Hindalco move to write off the goodwill as carrying cost of assets exceeds its
recoverable value.
Hindalco's shares slipped 1.54 per cent to close at Rs 41.55 on the Bombay Stock Exchange
Thus the acquisition is showing up negative growth but it cannot be said precisely because of
huge impact of slowdown on Novelies Business
Q3-Show Pre Post Merger/Alliance impact on stock prices as rise or dips in the graphs sketched
in Q2

Share Price movements of Hindalco

Share prices movements in quarter after merger

We can see that the stock prices of Hindalco were coming down till the deal was finalized and
the sources of funds arranged but once it was done the the stock prices started moving up as
news comes

Stock Price Volatility Due To Acquisition Related News

Headline Price
Price +/-
Before
After

Hindalco announces for the acquisition 5 –feb-2007 172.2

179.2 +

Hindalco completes acquisition of Novelis 16-May-2007

147
148.85 +

Novelis shareholders approve Hindalco`s bid 12-May-2007

147
148.85 +

Hindalco allots shares on preferential basis 12-Apr-2007 142.4

140.1 -

Hindalco write off goodwill of Novelis for 1.86 billion 42.2

41.55 -
Loss 7-Sep-2009

Thus with the effect of news stated above which are related to acquisition is completely visible

Q4-What are the key contribution(s) of the alliance? (Only 2 to be identified and statistically
supported).

Value-added products capacity of three million tons – Novelis has flat rolled products
capacity of three 3 million tons, producing aluminium sheets and light gauge products where the
end users are construction and industry, beverages and food cans, foil products and transport.
With the proposed acquisition, Hindalco would be completely forwarded integrated, with
primary metal facilities at low-cost locations and value-added products facilities near markets.

Access to large markets – Novelis operates in 11 countries and has approximately 12,500
employees. It has a global market share of about 19% in aluminium rolled products and
aluminium can recycling. It is established in Europe, North and South America, and Asia,
through which, Hindalco would now be able to handle the mounting demand in that region.

Novelis customers base include major brands such as Agfa -Gevaert, Alcan,
Anheuser-Busch, Ball, Coca-Cola, Crown Cork & Seal, Daching Holdings, Ford,
General Motors, Lotte Aluminium, Kodak, Pactiv, Rexam, Ryerson Tull, Tetra
Pak, ThyssenKrupp and others.
Management has stated that the replacement cost of the facilities would be $12bn and it would
take around ten years to build such a facility.