Aleris Corporation, a global aluminium rolled products producer, recently announced that it has entered into a definitive agreement to be acquired by Zhongwang USA LLC, a company majority-owned and led by Mr. Liu Zhongtian, founder of China Zhongwang Holdings Limited (China Zhongwang, HKEX code: 01333). The aggregate value of Aleris amounts to $2.33 billion, comprising $1.11 billion in cash for the equity to be paid by Zhongwang USA, plus $1.22 billion in net debt.
Aleris will continue to be headquartered in Cleveland, Ohio, and will be operated as an independent entity. The Aleris management team will remain in place, providing continuity for Aleris employees and customers and supporting the continued implementation of the Aleris strategy. Aleris will retain its name and continue to serve its customers with no changes to current operations, contracts or commitments. It will continue with the implementation of all strategic growth projects, including its major expansion project in Lewisport, Kentucky, which will enable Aleris to meet the North American automotive industry’s growing demand for aluminium auto body sheet.
The acquisition of Aleris reflects Mr. Liu’s commitment to disciplined operating investments over the long-term in an industry to which he has been committed for two decades. In addition to his role at Zhongwang USA, Mr. Liu is also the chairman and founder of China Zhongwang, the second largest aluminium extrusions product developer and manufacturer in the world and the largest in Asia. With the acquisition of Aleris, Mr. Liu will now oversee companies that have complementary geographic footprints and capabilities.
The transaction is expected to close in the first quarter of 2017 following the customary regulatory approvals and closing conditions.
Credit Suisse acted as financial advisor to Aleris. Fried, Frank, Harris, Shriver and Jacobson, LLP acted as legal advisors. Moelis & Co. advised the Aleris Board on certain aspects of this transaction. Paul, Weiss, Wharton & Garrison LLP acted as legal advisors to Oaktree Capital Management.
In China Zhongwang were advised by Jincheng Tongda & Neal, whilst in New York, they were advised by Freshfields.
Interview – Peng Lingyan – Jincheng Tongda & Neal:
Please tell me about your involvement in the deal?
I am one of the leading partners responsible for this deal, advising Zhongwang on transaction structure, acquisition documentation, PRC regulatory approvals, PRC anti-trust filings and financing documentation.
Why is this a good deal for all involved?
The acquisition of Aleris will represent the single largest overseas acquisition by a Chinese aluminium processing enterprise, and an important milestone in Zhongwang USA’s “going global” strategy. The newly combined company is expected to be well positioned to tap into development opportunities in the Chinese and global market. Aleris’ financial investors will successfully realize their returns from the sale.
This is also a very interesting and challenging transaction for all parties involved; it has all the features of a complex cross-border transaction, and required all counsel to work closely and creatively with Zhongwang.
What challenges arose? How did you navigate them?
There were a few PRC regulatory approvals and filings required prior to the closing of this deal. We needed to work with Zhongwang to obtain these approvals and filings. The tight foreign currency control in China created significant difficulty for this transaction, as well as many other cross-border transactions. We explored all possible routes with Zhongwang to find a feasible solution.