Aleris Keeps Door Open to Takeover by Chinese Aluminum Baron

(Bloomberg) -- Aleris Corp. hasn’t given up on its planned acquisition by Zhongwang USA LLC just yet.

The Cleveland-based aluminum-parts maker and the company controlled by Chinese entrepreneur Liu Zhongtian agreed to extend their merger agreement through Sept. 15. The original agreement was scheduled to expire Aug. 31. The transaction, which has faced regulatory hurdles in the U.S., would be China’s biggest-ever purchase of an overseas metals processor.

“We remain in discussions with Zhongwang USA on the pending acquisition,” Aleris spokesman Jason Saragian said in an email.

The extension follows multiple snags in getting approval from U.S. officials, who are increasing scrutiny of takeovers of U.S. companies by Chinese buyers. Last month, Aleris and Zhongwang USA withdrew their latest notice seeking approval of the transaction from the Treasury Department’s Committee on Foreign Investment in the U.S.

This week, people with knowledge of the matter said Indian billionaire Kumar Mangalam Birla is evaluating possible bids for both Aleris and Constellium NV as his conglomerate seeks to grow its aluminum operations overseas.

The attractiveness of a U.S. downstream aluminum producer comes as the industry is operating near full capacity while demand continues to grow in the auto and aerospace sectors at more than an 8 percent compound rate, according to Harbor Intelligence.

Other factors include a recent U.S. Commerce Department decision to levy duties on Chinese aluminum foil as well as the prospect of further measures that may result from the Trump administration’s Section 232 investigation into national-security threats posed by aluminum imports.

“Domestic prices are increasing and will increase in the event duties are imposed on imports of flat-rolled products,” Jorge Vazquez, the managing director of Austin, Texas-based Harbor Intelligence, said by telephone. “The flat-rolled products industry in the U.S. is operating basically at full capacity while demand is growing, and even more so in segments like auto sheet.”

Aluminum for delivery in three months has rallied 26 percent this year to $2,136 a metric ton on the London Metal Exchange. That would be its biggest annual gain since 2009 and is the best performer in 2017 on the Bloomberg Commodity Index.

To contact the reporter on this story: Joe Deaux in New York at jdeaux@bloomberg.net.

To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net, Steven Frank