Hindalco says committed to Aleris acquisition despite US lawsuit
US Justice Department has filed a lawsuit aimed at stopping Novelis Inc’s proposed $2.6 billion purchase of Aleris Corp, said a media report. Novelis is simultaneously fending off an anti-trust challenge in the European Union.
Novelis Inc., the US-based subsidiary of the Aditya Birla group’s Hindalco Industries, said it was committed to closing its proposed acquisition of Aleris Corporation despite the US Department of Justice (DOJ) lawsuit to block the transaction.
“Novelis intends to vigorously defend against the DOJ’s challenge, which it believes is without merit,” the world leader in aluminum rolling and recycling said in a statement. The company intends to close the transaction by 21 January, the outside date under the original merger agreement.
According to a Reuters report late on Wednesday, the US Justice Department has filed a lawsuit aimed at stopping Novelis Inc’s proposed $2.6 billion purchase of Aleris Corp because of concern over higher prices of aluminum sheet used to make cars.
The department, in a statement, said the deal would combine two of the four major North American producers of aluminum to make automobile bodies. The department described Ohio-based Aleris as an “aggressive competitor” and said the deal would give Novelis up to 60% of projected domestic capacity.
Novelis has fired back saying the justice department 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.
“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,” Steve Fisher, president and CEO Novelis, said in the statement.
The DOJ’s contention is that in cases where an automobile manufacturer has already picked aluminium over steel, it constrains procurement for the manufacturer by shrinking the market.
Novelis said that by focusing on just a small slice of steel-aluminum competition and ignoring the broader competitive process, “the DOJ’s theory contravenes well-established principles of market definition”. Novelis also said that the DOJ also disregards the extraordinary bargaining power of the automotive manufacturers and their ability to generate bid processes that will ensure competitive pricing for automotive body sheet.
In the statement, Novelis said it has reached an agreement with the DOJ on a timetable and process for resolving this dispute, and that the transaction closing date of January 21, 2020, still stands. “The company is confident that the transaction will ultimately receive all necessary regulatory approvals in the U.S. and in other relevant jurisdictions,” it added.
Novelis is simultaneously fending off an anti-trust challenge in the European Union, where the company awaits approval from the European Commission. A Reuters report on 29 August said Hindalco has offered to sell Aleris’s autosheet manufacturing plant in Duffel, Belgium, as a concession to allay the European Commission’s (EC’s) worries that the deal may affect input prices of carmakers in the region. Hindalco’s management, at the shareholders’ meeting in Mumbai last week, declined to comment on this.
