Aleris Corporation entered into a definitive agreement to be acquired by Zhongwang USA LLC, an investment company owned by Zhongwang International Group Ltd., parent company of China Zhongwang. Under the agreement, Zhongwang USA will acquire Aleris for $1.11 billion in cash for the equity, plus $1.22 billion in net debt.
“We are excited about this transition to strategic ownership as it will allow us to accelerate our strategy to expand our capabilities to support the production of high-value advanced materials for the global automotive and aerospace markets, while maintaining our position as a leading supplier to critical regional markets like building and construction,” said Sean Stack, president and CEO of Aleris. “We expect the transition to be seamless for our employees and customers, and that the new strategic shareholder will provide us with greater financial flexibility to continue to anticipate and meet the needs of our customers well into the future.”
A global aluminum rolled products producer, Aleris has 14 plants in Europe, North America, and Asia, serving diverse industries including aerospace, automotive, building and construction, commercial transportation, and industrial manufacturing.. The company has an annual revenue of around $3 billion and employs 5,000 people. Aleris reported that it will continue to be headquartered in Cleveland, Ohio, and will be operated as an independent entity, with the current management team remaining in place. The company aims to provide continuity for its employees and customers and will retain the Aleris name and continue with no changes to current operations, contracts, or commitments.
Aleris is currently implementing a $350 million expansion in Lewisport, Kentucky, that will equip the facility with additional heat treatment and finishing capabilities to produce wide aluminum auto body sheet for the automotive industry. New capabilities include a new wide cold mill, two continuous annealing lines, and an automotive innovation center. When fully operational, the new facility will allow for production of 480 million pounds of auto body sheet annually. According to Aleris, the Lewisport expansion, as well as all other strategic growth projects, will continue to be implemented following the sale.
“This acquisition is an international expansion to establish a complementary business foothold, as I strongly believe in the potential and prospects of Aleris and the aluminum industry as a whole,” said Liu Zhongtian, leader of Zhongwang USA and founder of China Zhongwang, the second largest aluminum extrusions product developer and manufacturer in the world and the largest in Asia. “Aleris has a strong management team, talented employees and industry-leading capabilities with a complementary geographic footprint. As the company enters the final phase of its Lewisport automotive project, I believe Aleris is well-positioned to capitalize on the positive demand trends we see globally, and I look forward to supporting the Aleris management team in implementing their growth strategies and pursuing continued success with expanded resources and financial and operational flexibility.”
China Zhongwang — which is not directly associated with the purchase of Aleris — has recently faced criticism from the U.S. aluminum extrusion industry and is currently facing a circumvention investigation by the U.S. Department of Commerce.
“The announcement that Zhongwang and Mr. Lui intend to purchase Aleris raises very serious concerns for the entire aluminum industry,” said Jeff Henderson, president of the Aluminum Extruders Council (AEC). “Zhongwang is a state-supported enterprise and has received large benefits and financing from the Government of China. Zhongwang also has a long history of circumventing and evading duties in trade cases by shipping over a billion pounds of ‘fake’ extrusions to Mexico and Vietnam. Zhongwang has refused to respond to every questionnaire the Department of Commerce has issued, it remains to be seen whether Zhongwang and its affiliates will respond to the Committee on Foreign Investment questionnaires.”
Since 2010, Aleris has been owned and controlled by a group led by certain investment funds of Oaktree Capital Management, L.P., with affiliates of Apollo Management, L.P., and Sankaty Advisors, LLC owning minority interests.
The acquisition is expected to close in the first quarter of 2017, following the customary regulatory approvals and closing conditions.