The company's wholly owned subsidiary, Novelis Inc, sign a definitive agreement to purchase Aleris Corporation for USD 2.58 billion.
Shares of Hindalco Industries added 7 percent in the opening trade on Friday as company's subsidiary is going to acquire a US company for USD 2.6 billion.
The company's wholly owned subsidiary, Novelis Inc, sign a definitive agreement to purchase Aleris Corporation, a global aluminium rolled products major, headquartered in the United States, for USD 2.58 billion in a debt finance deal.
The said acquisition is subject to customary closing conditions and regulatory approvals
Kumar Mangalam Birla, Chairman, Hindalco Industries said, "The acquisition of Aleris is the next phase of our aluminium value added products growth strategy. This will solidify our position as the world’s No.1 aluminium value-added products player."
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Brokerage: Emkay | Rating: Buy | Target: Rs 305
Emkay has maintained buy rating on Hindalco Industries with a target at Rs 305 per share.
According to research house, the Aleris deal is worked out to be at 7.2x EV/ EBITDA. It feels that the Aleris valuation is on the higher side, while synergy benefit if any is not considered.
The said deal is beneficial for Novelis on better market penetration and product mix, it added.
Brokerage: Jefferies | Rating: Buy | Target: Rs 318
Jefferies has retained buy on Hindalco with a target at Rs 318 per share.
Aleris deal is valuation rich but risk reward still positive, said Jefferies.
The deal may diversify Novelis' product mix and lift its auto sheet capacity, while Novelis margin should continue to expand. Aleris EBITDA could rise to USD 290 million by FY20, it added.
Brokerage: CLSA | Rating: Underperform | Target: Rs 212
CLSA has retained underperform rating on the stock and cut target price to Rs 212 from Rs 245 per share.
According to CLSA, the acquisition is a strategic fit for Novelis given similar business lines but EPS neutral and slightly value dilutive.
The target of Rs 212 factors in a negative Rs 15 per share Aleris acquisition value.
At 09:16 hrs Hindalco Industries was quoting at Rs 219.05, up Rs 12.50, or 6.05 percent on the BSE.
Posted by Rakesh Patil