DOJ sues to stop Novelis purchase of Aleris

DOJ sues to stop Novelis purchase of Aleris

Novelis reports it still expects to complete the acquisition of Aleris by January 2020.

September 5, 2019

The U.S. Department of Justice (DOJ) has filed a lawsuit aimed at stopping Atlanta-based Novelis' proposed $2.6 billion purchase of Cleveland-based Aleris Corp. because of concerns about higher prices for aluminum sheet used to make cars. Novelis is part of the Mumbai-based Aditya Birla Group

DOJ reported in a statement that the deal would combine two of the four major North American producers of aluminum to make the automobile bodies, according to a report from Reuters. The department described Ohio-based Aleris as an “aggressive competitor” and said the deal would give Novelis up to 60 percent of the projected domestic capacity. 

Novelis responded to the DOJ with a company statement that reaffirms the company’s “full commitment to closing its proposed acquisition of Aleris Corporation, notwithstanding the U.S. Department of Justice (DOJ) lawsuit to block the transaction. Novelis intends to vigorously defend against the DOJ’s challenge, which is believes is without merit.”

“The DOJ lawsuit is based on the contention that the only relevant competition among automotive body sheet providers is that among aluminum manufacturers such as Novelis and Aleris. It ignores competition from steel automotive body sheet, even though steel automotive body sheet is currently used for nearly 90 percent of the market,” Novelis reports in a news release in response to the DOJ’s lawsuit.

To win the lawsuit, the DOJ will need to prove that there is a distinct relevant market for aluminum automotive body sheet, which means that steel automotive body sheet does not significantly constrain the price and quality of aluminum automotive body sheet, Novelis reports. 

“The day-to-day reality of the automotive body sheet market is aluminum automotive body sheet striving to take share from steel, and the steel automotive body sheet companies fighting back,” says Steve Fisher, president and CEO of Novelis. “We are disappointed that the DOJ has missed this, but also confident that in the next phase of this process the full scope of the competition we face will be recognized appropriately. Our merger with Aleris threatens no one, and to the contrary will strengthen our ability to compete against steel, meet growing customer demand for aluminum, achieve our recycling goals and bolster our sustainability platform worldwide.”

According to a news release from Novelis, the company is still confident that it will be able to complete the acquisition of Aleris by Jan. 21, 2020, even if a remedy is required to address the DOJ’s concerns. If the deal is completed, Novelis will acquire Aleris’ 13 global manufacturing facilities, which includes melt shops that will consume aluminum scrap in several locations, including Davenport, Iowa; Lewisport, Kentucky; Uhrichsville, Ohio; and Richmond, Virginia.