Atlanta aluminum giant Novelis Inc. has extended its reach in Asia with an agreement to buy Aleris Corp., a Cleveland-based competitor, for $2.6 billion.
Upon closing in sometime in 2019, the company will be folded into Novelis to create a $15 billion aluminum conglomerate, still headquartered in Atlanta, where Novelis’ Indian parent company, Aditya Birla Group, has already poured more than $2 billion in expansion capital in recent years.
Aleris was attractive in large part because it offered greater international and product diversification for Novelis, which has vying to become a preferred supplier to auto makers looking to use aluminum over steel when possible to reduce weight in their cars. Novelis also a major player in beverage cans and other segments.
Novelis President and CEO Steve Fisher said Aleris, which has a strong aerospace presence, was poised for “transformational growth.”
“The significant investments they’ve made in the high-demand, high-value aerospace and automotive segments have resulted in favorable long-term, global contracts,” Mr. Fisher said.
The benefits of the combination will play out in China, where an Aleris factory in the city of Zhenjiang supplying aircraft giant Bombardier with aluminum plate sits just 50 miles from a Novelis facility in Changzhou. Their proximity will “add value through logistical efficiencies, closed-loop recycling, and providing greater opportunity for customer collaboration,” according to a news release.
The Zhenjiang plant is one of 13 Novelis acquires in the deal, which also includes automotive finishing facilities in Kentucky and Belgium.
Assuming it’s green-lighted by regulators, the combined company would have about 16,500 employees operating 37 facilities across 11 countries.
The deal is being financed entirely with debt.