Justice Department Blocks Major Aluminum Producer Acquisition on Antitrust Grounds
An arbitrator has ruled against Novelis Inc.’s attempt to purchase Aleris Corp., a fellow producer of rolled aluminum products. The Canadian aluminum company announced their intention to buy Cleveland-based Aleris in July 2018 for $2.6 billion and an agreement to take on debt, but the Justice Department formally challenged the arrangement with a civil antitrust suit in September 2019. Novelis agreed to refer the lawsuit to a binding arbitration process, which delivered its judgment against the Canadian manufacturer of aluminum products March 9 following a 10-day hearing.
Novelis Inc. manufactures and recycles aluminum products, including in the automotive and beverage can markets. It operates in North America, Europe, Asia and South America and is a subsidiary of Hindalco Industries Ltd., an Indian company headquartered in Mumbai, India. In September, CEO Steve Fisher said that acquiring Aleris would enable their company to compete against steel companies making automotive body sheet. “Our merger with Aleris threatens no one, and to the contrary will strengthen our ability to compete against steel,” said Fisher, who said 90% of the automotive body sheet market was steel.
In a post-arbitration statement released March 9, Fisher continued to defend the attempted merger as an attempt for his industry to compete with steelmakers. “This decision ignores the reality of the automotive body sheet market and the competition we have faced against steel for years,” he said.
That apparently wasn’t enough to dissuade the arbitrator, who ruled that aluminum auto body sheet—not metal auto body sheet in general—was a relevant product market. According to the Justice Department’s lawsuit, the Novelis-Aleris combination would control 60% of projected total domestic capacity for that market. In a statement from the Justice Department, Assistant Attorney General Makan Delrahim of DoJ’s Antitrust Division called the decision a “victory” for automakers, consumers and taxpayers that would “fully preserve competition in this important industry.”
Aleris, headquartered in Cleveland, Ohio, manufactures flat-rolled aluminum products for the automotive, aerospace, building and construction industries. The ruling means that Novelis must divest Aleris’s aluminum auto body sheet operations in North America, including a plant in Lewisport, Kentucky which makes embossed, mill finish, and painted aluminum coil, according to Aleris's website.
In a statement, Fisher said his company would continue to move forward with acquiring Aleris’s other assets, including an aluminum plant in Duffel, Belgium that Novelis has agreed to sell to GFG Alliance according to Reuters. “In order to close its acquisition of Aleris, Novelis must receive EC [European Commission] approval of the buyer of Aleris's Duffel plant. Once that approval is received, Novelis will close the transaction as quickly as possible,” said Fisher. Novelis is also on the hook to pay for fees related to the arbitration judgment to the Justice Department.
