Aleris to sell off recycling and specialty businesses

 Aleris, based in Cleveland, has signed a definitive agreement to sell its North American and European Recycling and Specification Alloys businesses to an affiliate of Sherman Oaks, California-based Signature Group Holdings, splitting the company that it created in 2004 when it merged Kentucky’s Commonwealth Aluminum with Texas-based IMCO Recycling.

The sale includes 18 production facilities in North America and six in Europe. The facilities engage in secondary aluminum smelting and the production of specification alloy products. Signature has agreed to pay an aggregate of $525 million for the businesses in the form of $465 million in cash, with the remainder in cash and preferred shares of Signature Group Holdings, subject to customary post-closing adjustments.

Aleris' decision to divest the businesses follows a strategic review process that was announced in April.

When Aleris and Commonwealth merged a decade ago, the combined value of the companies was $345 million, according to Securities and Exchange Commission filings. IMCO was the larger portion of the merger at 56 percent, valuing it at about $186 million at the time.

"The sale of the recycling and specification alloys businesses will result in a stronger, more focused Aleris that will have greater flexibility to concentrate resources in the areas with the highest growth potential," Steve Demetriou, Aleris chairman and CEO says. "We have made a number of significant investments in our rolled products business over the past few years to serve the automotive, aerospace, and building and construction industries and remain committed to strengthening our position in these key markets."

Though the recycling unit is selling for more than the combined value of the two companies from a decade ago, the Commonwealth/IMCO merger wasn’t without some problems. In early 2009, at the depths of the global economic collapse, Aleris filed for Chapter 11 protection from its creditors in U.S. Bankruptcy Court. The company restructured its debt and emerged from bankruptcy in 2010 with fresh capital from private equity funds.

Aleris has discussed going public several times since emerging from bankruptcy, filing an updated prospectus with the SEC as recently as 2012. But the company has not yet sold shares on public exchanges.

The company's rolled products business has been the focal point for numerous growth initiatives. Aleris recentlyannounced the expansion of its Lewisport, Kentucky, facility to serve the global automotive industry and earlier this year completed the acquisition of Nichols Aluminum, which included four rolled products facilities in North America that serve a variety of industries including building and construction. Last year, the company unveiled its  aerospace plate mill in Zhenjiang, China, and a new automotive facility in Duffel, Belgium.

"The recycling and specification alloys businesses are profitable businesses led by a talented leadership team that have delivered strong operational performance. We are pleased that we have found a buyer that we believe will be an exceptional partner for the future growth of these businesses, and look forward to maintaining a strong commercial relationship as they will continue to be an important supplier for Aleris," Demetriou adds.

The transaction is expected to close in the coming months following customary regulatory approvals and closing conditions. The company remains committed to providing the highest level of service to its recycling and specification alloys customers through the transition period.