Atlanta-based aluminum producer Novelis, a part of the Mumbai-based Aditya Birla Group, has signed a definitive agreement to acquire Cleveland-based aluminum producer Aleris. The announcement follows speculation reported earlier in the week by Recycling Today.
The transaction is being valued at $2.6 billion, an amount that includes the assumption of some debt by Novelis. The current majority owner of Aleris is Los Angeles-based Oaktree Capital Management, which helped purchase the firm out of bankruptcy protection in 2010.
In addition to owning Novelis, Aditya Birla also owns Hindalco, one of India’s largest aluminum producers. The Novelis bid for Aleris follows an unsuccessful one in 2017 by investors associated with Chinese aluminum producer Zhongwang Holdings Ltd.
Novelis, in a news release announcing the definitive agreement, points to what it calls several benefits to the transaction:
- to establish a more diverse product portfolio that includes aerospace, beverage can, automotive, building and construction, commercial transportation and specialty products;
- to integrate complementary assets in Asia to include recycling, casting, rolling and finishing capabilities and allowing Novelis to more efficiently serve the growing Asia market;
- to broaden Novelis’ automotive business to meet growing demand and diversifying its global footprint and customer base;
- to strengthen the company’s ability to compete against steel by gaining a greater platform for production, innovation and service; and
- to execute a fully debt-funded deal with leverage forecasted to peak below four times at closing, and provide a return to a multiple of three in about two years.
“Acquiring Aleris is the right opportunity at the right time, as they are set for transformational growth,” says Steve Fisher, Novelis president and CEO. “The significant investments [Aleris has] made in the high-demand, high-value aerospace and automotive segments have resulted in favorable long-term, global contracts. These investments, coupled with a diverse and talented workforce, will add tremendous value to our organization and allow us to deliver the highest quality innovative aluminum solutions to our customers.”
If the deal is approved, Novelis will acquire Aleris’ 13 global manufacturing facilities. That includes melt shops that consume aluminum scrap in several locations, including in Davenport, Iowa; Lewisport, Kentucky; Uhrichsville, Ohio; and Richmond, Virginia.
The acquisition also will include Aleris’ new automotive finishing lines in Lewisport, Kentucky, which has a significant amount of its 200,000 metric tons of capacity already under contract. The deal also includes 100,000 metric tons of auto capacity at Aleris’ facility in Duffel, Belgium.
In addition, the deal will boost Novelis’ operations in China, according to the firm. Aleris’ Zhenjiang, China, facility is near Novelis’ existing Changzhou plant, which could provide greater opportunity for customer collaboration, says Novelis.
“With the support of our private equity owners, our Aleris team has done an excellent job of implementing our company's strategic transformation over the past several years,” says Sean Stack, Aleris chairman and CEO. “I am confident that our assets and people will continue to thrive and contribute to Novelis’ future success.”