US Justice Dept Files Suit To Prevent Novelis Acquisition Of Aleris

A law suit that is aimed at preventing the proposed acquisition of Aleris Corp by Novelis Inc’s in a deal worth $2.6 billion was filed by the United States Justice Department on Wednesday over concerns that the merger could result in increased costs for aluminum sheets that are used to manufacture cars in the country.

This possible increase in cost of aluminum sheets can be caused because the merger would result in the combination of two of the four major North American producers of aluminum that is used for manufacturing of bodies of automobiles, the department said in a statement. The Ohio-based Aleris was described by the department as an “aggressive competitor” and added that up to 60 per cent of projected domestic capacity in the US could come under the control of Novelis because of the proposed deal.

Novelis was still determined to bring a closure of the deal by January 21 which is the outside date for the merger agreement, said the company which is based in the United States but is owned by Hindalco Industries of India. The US Justice Department has not understood that the market for aluminum was much larger than perceived by it as well as aluminum competes with steel, the company also said.

Two companies had announced the deal in July 2018. Earlier, a deal for the acquisition of Aleris by Zhongwang USA, an investment firm backed by a Chinese tycoon, was struck by Aleris. However that proposed deal had to be scrapped after it was not approved by a national security panel, the U.S. Committee on Foreign Investment in the United States, in late 2017.

“We continue to believe that this acquisition will be extremely positive for Aleris customers, employees and shareholders,” Aleris Chairman and Chief Executive Sean Stack said in a statement.

Generally, the merging companies and the Justice Department’s Antitrust Division come to an agreement about the use of binding arbitration to define the product market which typically is the most crucial battle in any antitrust fight because it is a tendency of the merging companies to portray the relevant market to be much larger than perceived by the anti-trust bodies so ta the merging companies and the new merged entity appear to be small players in the market.

“This arbitration would allow the Antitrust Division to resolve the dispositive issue of market definition in this case efficiently and effectively, saving taxpayer resources,” said Assistant Attorney General Makan Delrahim of the Justice Department’s Antitrust Division, in a statement.

(Adapted from Reuters.com)

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