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Novelis Inc., the Atlanta-based aluminium and metals flagship company of the Aditya Birla Group, will contest the US Department of Justice (DOJ) lawsuit to block its proposed acquisition of Aleris Corporation.
Novelis in a statement said that the DOJ’s challenge is without merit.
“The DOJ lawsuit is based on the contention that the only relevant competition among automotive body sheet providers is that among aluminium manufacturers such as Novelis and Aleris. It ignores competition from steel automotive body sheet, even though steel automotive body sheet is currently used for nearly 90 per cent of the market,” the statement said.
The US Department of Justice on Wednesday said it has filed a lawsuit against Novelis seeking to stop it from acquiring Aleris over concern that the acquisition would create a monopoly in aluminium industry.
Acquisition
Earlier, the European Commission had suspended the deadline to clear the Novelis-Aleris acquisition on similar concerns.
Novelis had last year announced that it would buy Aleris Corporation, one of the largest aluminium producing companies in US, for $2.6 billion. The objections raised by DOJ could further delay the acquisition. Novelis, however, said it is confident that the DOJ suit is not an impediment to closing the transaction by the January 21, 2020, even if a remedy is required to address the DOJ’s competitive concerns.
Read: Why Novelis’ acquisition of Aleris is good news for Hindalco
Steve Fisher, President and CEO, Novelis Inc. said, “the day-to-day reality of the automotive body sheet market is aluminium automotive body sheet striving to take share from steel, and the steel automotive body sheet companies fighting back.”
“We are disappointed that DOJ has missed this, but also confident that in the next phase of this process the full scope of the competition we face will be recognized appropriately. Our merger with Aleris threatens no one, and to the contrary will strengthen our ability to compete against steel, meet growing customer demand for aluminium, achieve our recycling goals, and bolster our sustainability platform worldwide.”
Challenges for DOJ
To prevail in its lawsuit, the DOJ will need to prove that there is a distinct “relevant market” for aluminium automotive body sheet, which means that steel automotive body sheet does not significantly constrain the price and quality of aluminium automotive body sheet. The DOJ does not deny that steel automotive body sheet usually competes with aluminium automotive body sheet, but instead contends that the constraint from steel is absent from some procurements (where an automotive manufacturer has supposedly already decided between steel and aluminium). Novelis believes that by focusing on just a small slice of steel-aluminium competition and ignoring the broader competitive process, the DOJ’s theory contravenes well-established principles of market definition.
"The DOJ also disregards the extraordinary bargaining power of the automotive manufacturers and their ability to generate bid processes that will ensure competitive pricing for automotive body sheet, " Novelis said in a statement.
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