Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: EC adopts measures to preserve divestment of aluminum automotive body sheet plant in Belgium, (Feb 18, 2021)

By Nicole D. Prysby, J.D.

The EC imposed final measures on the acquisition by Novelis Inc., of aluminum product manufacturer Aleris Corporation’s plant in Duffel, Belgium.

The European Commission today announced that it adopted final measures to preserve the divestment of the former Aleris plant in Duffel, Belgium, by Novelis, under the European Union Merger Regulation. To obtain clearance of its acquisition of Aleris in 2019, Novelis offered to divest the plant in binding commitments but failed to close the sale within the deadline, despite extensions granted. The sale closed in September 2020 and the EC imposed final measures on Novelis. The measures include a non-reacquisition measure and a non-solicitation measure preventing Novelis from soliciting the Duffel plant’s customers or standing orders. They also reproduce other safeguards and obligations typically required under the commitments, which in this case became inapplicable after Novelis failed to close the sale by the deadline. Daily penalty payments are foreseen in the event Novelis fails to comply with the measures. Last year, the Department of Justice entered into a proposed final settlement that would require Novelis to divest Aleris’ entire North American aluminum auto body sheet operations.

The EC approved Novelis’ acquisition of Aleris in October 2019, on the condition that the company divest Aleris’ aluminum automotive body sheets business in Europe. U.S.-based Novelis is the world’s largest producer of aluminum automotive body sheets. Both companies are global manufacturers of aluminum flat rolled products and have a significant presence in the European Economic Area (EEA). As notified, the merged entity would have had very high market shares and controlled a very significant proportion of the manufacturing capacity for aluminum automotive body sheets in the EEA. Also, the limited number of smaller competitors would not have been able to defeat a price increase 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 parties offered to divest Aleris’ entire aluminum automotive body sheet business in Europe, including its production plant in Duffel, Belgium. The EC concluded that the proposed divestiture removed the entire overlap created by the transaction in aluminum automotive body sheets in Europe. The divested assets constitute a viable integrated business that would enable a suitable buyer to effectively compete with the merged entity.

Novelis agreed to divest the plant in binding commitments, and the EC approved Liberty House as a suitable purchaser. But despite the EC granting several extensions of the closing deadline, Novelis failed to close the sale within the extended deadline. The EC then adopted provisional interim measures to preserve competition, because the 2019 clearance decision and commitments attached to it became inapplicable as soon as the deadline expired.

On September 30, 2020, Novelis sold the Duffel plant to Liberty in accordance with the interim measures, and the EC imposed final measures on Novelis. These measures included a non-reacquisition measure preventing Novelis from re-acquiring all or part of the Duffel plant, as well as a non-solicitation measure preventing Novelis from soliciting the Duffel plant’s customers or standing orders. They also reproduced other safeguards and obligations typically required under the commitments, which in this case became inapplicable. The decision provides for transitional agreements and measures on the trustee’s mandate, as well as on investment funding for the benefit of the plant. Finally, daily penalty payments are foreseen in the event Novelis fails to comply with the measures.

Department of Justice review. After securing arbitration in first use of its authority under the Administrative Dispute Resolution Act to resolve a merger dispute, in May 2020 the Department of Justice Antitrust Division filed a proposed final judgement with the district court in Akron, Ohio, to require Novelis to divest Aleris’ entire North American aluminum auto body sheet operations. The proposed final judgment, if approved by the court, would settle the Antitrust Division’s concerns that Novelis’ proposed $2.6 billion acquisition of Aleris would harm competition in the aluminum automotive body sheet (ABS) market as the two companies were among only four ABS manufacturers in North America (U.S. v. Novelis Inc., Case: 1:19-cv-02033).

Companies: Novelis Inc.; Aleris Corporation

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