European Commission (EC) authorities have approved, through the EU Merger Regulation, the acquisition of Aleris by Novelis.
The decision is conditional on the divestiture of Aleris’ aluminium automotive body sheets business in Europe.
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The decision follows an in-depth investigation of the deal, which combines Novelis, the largest producer of aluminium automotive body sheets worldwide, with Aleris, an established supplier of the same product.
Both companies are global manufacturers of aluminium flat rolled products and have a significant presence in the European Economic Area (EEA).
During its investigation, the Commission gathered extensive information and received feedback from several customers active in various sectors, such as construction, electronics, packaging and in the manufacturing of cars.
The Commission found aluminium flat rolled products, such as aluminium automotive body sheets, used in the automotive industry, are in a separate market than other aluminium products.
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By GlobalDataThis means the merged entity would have had very high market shares and controlled a very significant proportion of the manufacturing capacity for aluminium automotive body sheets in the EEA.
In addition, the limited number of smaller remaining competitors active in the market would not have been able to defeat a price increase, also due to their limited spare capacity. The transaction was also found to reduce the incentives of the merged entity to invest in additional manufacturing capacity.
The Commission therefore had concerns the transaction, as notified, would have resulted in higher prices for European customers for aluminium automotive body sheets.
Automotive customers have only limited possibilities to switch from aluminium to steel, and the range of suppliers, prices and supply chains are different across these products. They rely on competitive prices for this product also as a way reducing the weight of their vehicles.
Novelis and Aleris also produce a number of aluminium products other than aluminium automotive body sheets used in industries, such as building, construction and floor heating. However, the Commission concluded there were no concerns relating to those products.
To address the Commission’s competition concerns, the parties offered to divest Aleris’ entire aluminium automotive body sheet business in Europe, including its production plant in Duffel, Belgium.
In order to preserve its viability, the Duffel plant’s divestiture will also include other products currently manufactured at that plant.
The proposed divestiture removes the entire overlap created by the transaction in aluminium automotive body sheets in Europe. Furthermore, the Duffel plant constitutes an integrated production site which already produces almost the entirety of the upstream inputs required for its downstream operations, including hot rolled coils and most slabs.
The divestiture will include R&D assets as well as funding for an investment to the benefit of the buyer to further improve its capabilities.
The Commission found the divested assets constitute a viable integrated business which would enable a suitable buyer to effectively compete with the merged entity.
Feedback received from market participants on the proposed commitments confirmed the Commission’s view.
The Commission therefore concluded the transaction, as modified by the commitments, would no longer raise competition concerns.
The decision is conditional on full compliance with the commitments.
