China's Zhongwang acquires PE-owned Aleris for $2.3b
A unit of China Zhongwang has agreed to buy US aluminum company Aleris Corporation in a deal worth $2.3 billion, facilitating an exit for majority owner Oaktree Capital Management.
According to a statement, the transaction will include a cash component of $1.1 billion plus $1.2 billion in transferred debt. Other vendors will include private equity firm Apollo Global Management and Bain Capital's credit investment and public equities division. In 2010, Oaktree, Apollo and Bain committed to a $690 million investment to take a controlling stake in the company, which was in bankruptcy as a result of the global financial crisis.
Zhongwang hopes to leverage a projected increase in lightweight metal usage by the US car industry through Aleris' $350 million expansion effort in Lewisport, Kentucky, where 200,000 metric tons of additional annual aluminum output is planned to come on line by next year.
"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, founder of China Zhongwang, which is the world's second-biggest aluminum company.
"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."
Founded in 2004, Aleris supplies aluminum products to the automotive, aerospace, construction, commercial transportation, defense and industrial manufacturing sectors. It ships about 200,000 metric tons of finished product per quarter from 13 facilities across North America, Europe and Asia. Revenue was steady during 2015 at $2.9 billion while profit declined 44.5% to $48.8 million.
US-headquartered Oaktree targets distressed and corporate debt, control investing, convertible securities, real estate and listed equities. It claims $98 million of assets under management as of June, about 10% of which are based in Asia Pacific. It has operated in the region since 1998 and has offices in Beijing, Hong Kong, Seoul, Singapore, Shanghai and Tokyo. A Sydney office was opened earlier this year.
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