Birla closes in on Aleris deal, ties up $2.6 bn in funding

Almost eight months after the Aditya Birla group began negotiations to acquire Ohio-based aluminium maker Aleris Corp., the talks are heading towards a definitive agreement, likely to be signed in the next few weeks, said two people directly aware of the development, requesting anonymity, as the discussions are private.

According to the people cited above, the negotiations had slowed down primarily due to antitrust issues surrounding Aleris.

The talks have revived after the managements of Aleris and the Aditya Birla group, represented by its North America subsidiary Novelis, reached an agreement over the extent of responsibility both sides will bear to pass the scrutiny of the Committee on Foreign Investment (CFI).

CFI, the US government body that reviews foreign investments in domestic firms and determines whether those potential investments impact national security, had earlier rejected an acquisition bid from Chinese aluminium maker Zhongwang.

Aleris makes rolled fabricated aluminium products and has 13 manufacturing facilities across North America, Europe and China, according to the company website. It caters to different sectors, including aerospace, automotive, defence, building and construction, transportation, packaging and consumer goods. A significant portion of its production is for the US defence industry. The company is owned by private equity funds Oaktree Capital Group LLC and Apollo Global Management LLC.

“The structure of the deal is already laid out and funding to the tune of $2.6 billion has been tied up,” said the first person cited above. “The Aditya Birla group has incorporated a separate entity under its US-based subsidiary, Novelis Inc., which will act as the bidding company.”

The second person said that the bidding company will raise about $1.8 billion debt, while the rest will be raised by Novelis. “The funding will include a term B loan, a loan facility with a portion carved out for non-banks, and institutional investors. The bidding company will also raise a bridge loan of $1 billion over 18 months, which will be partly repaid by Aleris cash flows and refinanced potentially by dollar bonds.”

Aditya Birla” is creating a obligor group with shared liability among Aleris, the bidding company, and Novelis,” the second person added.

When contacted, an Aditya Birla group spokesperson declined to comment. An email query to Aleris Corp. remained unanswered.

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