DOJ rules Aleris Lewisport can’t become part of Novelis
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By Dave Taylor
It’s official: Aleris Lewisport will not become part of Novelis as part of a $2.6 billion sale of the Aleris corporation, which is expected to close sometime this year.
An arbitrator ruled Monday that Novelis, which is headquartered in Atlanta but owned by the Indian conglomerate Aditya Birla Group, must sell the Lewisport mill because the DOJ argued that since Novelis and Aleris were competitors in auto body sheet and the sale would give Novelis control of more than 60 percent of the market, that violated Section 7 of the Clayton Act that prohibits mergers that lessen competition.
Novelis argued that the auto body sheet market includes steel and aluminum, in which case its market share would be lower than the more than 60 percent number the DOJ came up with by only counting aluminum ABS.
The arbitration was short, at least compared to the glacial speed of other parts of the merger.
“It was a two-week process, pretty much,” Mike Touhill, spokesman for Novelis, said Tuesday. “It was a very finite amount of time so we had X amount of time to present our case and the arbitrator had X amount of time to make a decision.”
That arbitrator ruled that Lewisport cannot become part of Novelis and must instead be sold to a third party.
“This decision ignores the reality of the automotive body sheet market and the competition we have faced against steel for years,” Novelis CEO Steve Fisher said in a press release Monday. “Aluminum remains the material of choice for our customers, and we are going to continue to provide them with the innovative, lightweight and sustainable solutions they demand.”
“We are moving forward with the acquisition of Aleris to realize the many benefits this transaction will bring to our employees, customers and the aluminum industry as a whole,” he said.
While Lewisport’s location is the headline in the story of the ruling, the arbitration was about more than that.
“It was all of Aleris’ North American automotive assets, which includes a facility in Madison Heights, Michigan, and Lewisport,” Touhill said. “Clearly Lewisport is the larger entity but they have a facility in Detroit that I believe operates as a technical/commercial/sort of sales office.”
No guidance has been handed down on whether the Lewisport mill must be sold along with the Michigan office, or if they can be sold separately.
“That’s to be determined,” he said.
“Personally, I don’t know how critically linked the two are. I think they are linked quite literally in terms of support and resources but I don’t know how that will look going forward,” he said.
A sale between two companies with international locations and owners has many moving parts, and Novelis was recently given approval for the sale by the European Commission, contingent on the company selling off Aleris’ Duffel, Belgium plant.
Novelis has found a British buyer for that plant, Liberty House Group, but that sale must also be approved by the EC.
“Once the European Commission approves our proposed buyer we will close the Aleris transaction,” Touhill said. “And we will do that prior to divesting the Lewisport asset.”
Novelis will buy the entirety of Aleris’ worldwide operations, including the Lewisport mill and its CALP lines, but Lewisport must be sold to someone else, which will mean a vague period of transition of undetermined length.
“It will not become Novelis,” he said. “What I believe will happen is that Lewisport and Madison Heights will be held separate, or ring fenced, if you will, and a third-party monitoring trustee will operate or oversee the facilities until a buyer closes on those assets.”
That means the Aleris name might remain for the time being, at least until the new buyer decides what it wants to do with its new plant.
For those in Lewisport, not much should change in the interim, Touhill said.
“The best guidance I can give there is it’s business as usual,” he said.
Aleris’ current headquarters in Beachwood, Ohio, will make the switch to Novelis immediately.
“The Beachwood facility and its employees there will become part of Novelis when we close that transaction,” he said. “What we do with that facility and that building, the physical asset there, we’ve not decided publicly what we’re going to do there.”
It likely won’t just disappear or be shut down, he said.
“To my understanding there’s quite a bit of business that’s run out of that location, so it very much would be an important part of the acquisition for us,” he said.