Finance news affecting secondary aluminum markets

Finance news affecting secondary aluminum markets

Aleris deal terminated, while Real Alloy’s stock price plummets.

November 14, 2017

Cleveland-based aluminum producer Aleris Corp. has announced the company’s planned acquisition by Zhongwang USA LLC will not proceed. Zhongwang USA is a United States-based firm set up by the chairman of China-based China Zhongwang Holdings Ltd.

In a news release announcing the end of the potential transaction, Aleris states, “The merger was subject to customary regulatory approvals, including approval from the Committee on Foreign Investment in the United States (CFIUS). In July 2017, CFIUS raised concerns about the transaction, and the parties withdrew their filing while extending the merger agreement to allow for additional discussions.” That extended agreement time lapsed Nov. 12, 2017.

“While this is not the outcome we intended, we remain committed to our growth strategy and have made great strides over the past year in expanding our capacity and developing the capabilities required to meet the future demands of our industry,” says Sean Stack, Aleris chairman and CEO. “This includes our automotive expansion project in Lewisport, Kentucky, which is beginning to serve customers.”

Since 2010, Aleris has been owned and controlled by a group led by investment funds within Los Angeles-based Oaktree Capital Management LP, as well as by certain funds managed by New York-based Apollo Management LP. “Our ownership group remains committed to Aleris and highly supportive of the company’s strategy,” says Stack.

He continues, “I am proud of our employees’ focus and accomplishments over the past several months and appreciate the support we’ve received from customers. Aleris remains well-positioned for future growth, and we will continue to focus on serving our customers with excellence as we move forward.”

In the days prior to the Aleris announcement, shares in the holding company that owns secondary aluminum producer Real Alloy began dropping in value, falling to below 65 cents per share by Monday, Nov. 13.

The original assets that comprised Real Alloy were sold off by Aleris to an investor group in late 2015. Real Alloy also later acquired three plants formerly run by Beck Aluminum Alloys. The company currently has 17 production plants in North America and six in Europe.

As of mid-November, analysts and credit agencies were expressing concern about the ability of Real Industries (the holding company of Real Alloy) to keep its stock listed.