Zhongwang USA, backed by Chinese aluminum magnate Liu Zhongtian, said it will buy US aluminum company Aleris Corp.
The US$2.33 billion deal comes as Liu and Zhongwang International Group Ltd., the parent of Zhongwang USA, are embroiled in a dispute over US import duties amid broader trade tensions between the US aluminum industry and China, Reuters reports.
It marks the biggest entry by a Chinese company into the US aluminum industry since trade tensions began ramping up in recent years.
Zhongwang International is parent of China Zhongwang Holdings Ltd., the world’s second-largest producer of aluminum extrusions.
It has been accused of evading US import duties on extruded products, prompting an investigation by the US Department of Commerce.
The acquisition has strategic importance because Aleris is in the midst of a US$350 million expansion of its Lewisport, Kentucky rolling mill to produce automotive body sheet for US auto manufacturers.
It hopes to produce 200,000 tons per year and begin shipping in 2017.
Liu said in a statement that Aleris is “well-positioned to capitalize on the positive demand trends we see globally”.
Automakers like Ford Motor Co. have been moving toward aluminum, which is lighter than steel, to reduce body weight of autos in order to improve gasoline mileage, which will reduce emissions.
Aleris has been owned by a group of funds including Oaktree Capital Management LP and Apollo Management LP since it emerged from bankruptcy in 2010.
It has plants in the United States, Europe and Asia and supplies fabricated products to the aerospace, construction, automotive and defense industries.
Sean Stack, chief executive officer of the Cleveland-based company, said the transition to strategic ownership from private equity would allow it to focus on long-term investments in the US automotive market and aerospace market in China “without worrying about the next quarter’s performance”.
Zhongwang produces extrusions for the automotive sector, and recently built a rolling mill in China for auto body sheet.
Stack said the two parties have not yet gotten into the details of how they might collaborate.
Extrusion is the process of shaping aluminum by forcing it to flow through an opening in a die.
Liu has a net worth of US$3.1 billion, according to Forbes. The company will pay US$1.11 billion in cash and take on Aleris’s US$1.22 billion in net debt.
The deal is expected to close in the first quarter of 2017.
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