Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Novelis has announced the acquisition of 31.2% stake in its Korean
subsidiary, taking (Novelis) ownership to practically 100% (current
ownership at 68%). The company would pay USD350mn in cash, giving it
an equity valuation of USD1.1bn. The transaction is expected to be closed
by December 31, 2011.
Effective valuation looks fair, but not cheap
We estimate the FY11 EBITDA of Korean business at USD220mn. Novelis Korea has
been debt free since October 2010. While we do not have the outstanding cash figure,
we estimate it at USD100mn based on one‐year cash accruals. Novelis’ consolidated
cash is USD286mn as on September 30, 2011. Considering the ongoing capex and the
challenging market conditions, the company may not want to draw down this cash. If
we assume it to raise the transaction amount entirely from debt and assume the
outstanding cash at USD100mn for the Korean arm, the effective EV/EBITDA works out
to be 6.3x.
Impact on FY13 PAT marginally positive
We estimate the FY13 consolidated PAT/ EPS to be positively impacted by ~1% after
considering the increased debt and corresponding interest.
Total control to be a long term positive
The key drivers of the transaction are the need for providing an exit to minority
shareholders (mainly Taihan Electric Wire Co. Ltd.) and obtaining full control for
Novelis. Total control over the Korean arm provides Novelis with the entire upside from
its proposed capacity expansion of 350kt in Korea. This expansion can generate an
incremental EBITDA of ~USD150mn in FY15, provided that the current Asian business
EBITDA/t is maintained and some benefits accrue from its proposed recycling. Besides
the existing EBITDA of USD220mn, Novelis would enjoy the full impact of this
incremental EBITDA from FY15 onwards.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Novelis has announced the acquisition of 31.2% stake in its Korean
subsidiary, taking (Novelis) ownership to practically 100% (current
ownership at 68%). The company would pay USD350mn in cash, giving it
an equity valuation of USD1.1bn. The transaction is expected to be closed
by December 31, 2011.
Effective valuation looks fair, but not cheap
We estimate the FY11 EBITDA of Korean business at USD220mn. Novelis Korea has
been debt free since October 2010. While we do not have the outstanding cash figure,
we estimate it at USD100mn based on one‐year cash accruals. Novelis’ consolidated
cash is USD286mn as on September 30, 2011. Considering the ongoing capex and the
challenging market conditions, the company may not want to draw down this cash. If
we assume it to raise the transaction amount entirely from debt and assume the
outstanding cash at USD100mn for the Korean arm, the effective EV/EBITDA works out
to be 6.3x.
Impact on FY13 PAT marginally positive
We estimate the FY13 consolidated PAT/ EPS to be positively impacted by ~1% after
considering the increased debt and corresponding interest.
Total control to be a long term positive
The key drivers of the transaction are the need for providing an exit to minority
shareholders (mainly Taihan Electric Wire Co. Ltd.) and obtaining full control for
Novelis. Total control over the Korean arm provides Novelis with the entire upside from
its proposed capacity expansion of 350kt in Korea. This expansion can generate an
incremental EBITDA of ~USD150mn in FY15, provided that the current Asian business
EBITDA/t is maintained and some benefits accrue from its proposed recycling. Besides
the existing EBITDA of USD220mn, Novelis would enjoy the full impact of this
incremental EBITDA from FY15 onwards.
No comments:
Post a Comment