Kumar Mangalam Birla, chairman of the Aditya Birla Group, speaks during an interview in his office in Mumbai. (Photographer: Scott Eells/Bloomberg News)

Indian Billionaire Birla Taps Banks for U.S. Aluminum M&A Deal

(Bloomberg) -- India billionaire Kumar Mangalam Birla’s Hindalco Industries Ltd. has gathered a consortium of Asian, U.S. and European banks to fund its takeover of aluminum producer Aleris Corp.

Novelis Inc., the U.S. unit of Hindalco, has mandated a 20-strong bank group to arrange a $2.28 billion dual-tranche loan that will finance the purchase of U.S.-based Aleris, according to people familiar with the matter. Hindalco is part of the huge Indian conglomerate Aditya Birla Group, also led by the tycoon, which has been on an acquisition spree.

The acquisition will expand Hindalco’s presence in the automotive sector.

The facility includes a $1.5 billion 12-month bridge loan, and a $775 million five-year tranche, according to the people.

Why it Matters?

  • Novelis’ acquisition of Aleris also provides Hindalco access to high-growth sectors including automotive and transportation, and entry into aerospace and defense.
  • Novelis and Aleris could sell more premium aluminum alloy sheets as automakers seek ways to reduce vehicle weights in response to stricter fuel-efficiency standards, Yi Zhu, an analyst at Bloomberg Intelligence, wrote Jan. 29.

Key Takeaways

  • Novelis attracted 18 lenders to a $1.8 billion syndicated loan in 2017, even with a non-investment-grade rating. The facility for Aleris’ acquisition will demonstrate if there is still appetite for the company’s debt.
  • Other Aditya Birla Group companies remain prized borrowers in the loan market. Last year, SKI Carbon Black Mauritius Ltd., a holding company for Birla Carbon, signed a $1.2 billion facility to refinance loans from 2016 at a lower margin.

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