If China’s Zhongwang is unable to acquire Aleris Corp., a US-based producer of rolled aluminum products, then India’s Hindalco Industries Ltd may bid for it. Hindalco’s subsidiary Novelis Inc., in a similar business as Aleris, may find value in acquiring it. The asking price is not trifling, and estimated at about $2.5 billion (around Rs16, 325 crore today), according to this report in Mint. It could go higher if others join the fray.
Why would Novelis be interested in Aleris? It has some spare cash, for starters. In May, it had announced the sale of a 50% stake in a South Korean unit for $315 million. Post-tax, it would get $260 million and that cash can be used for an acquisition, said its management in a conference call held in May. Its balance-sheet capability is also much improved, with free cash flow of $361 million in the fiscal year 2017 (FY17), up 2.3 times over the previous year, and its net debt to adjusted Ebitda has fallen below four times. Ebitda is short for earnings before interest, tax, depreciation, and amortization.
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