Aluminum producer and recycler Novelis Inc. has hit a snag in its efforts to acquire Aleris Corp., a producer of aluminum rolled products.
The U.S. Justice Department filed a civil antitrust lawsuit on Wednesday to block the proposed acquisition to "preserve competition in the North American market for rolled aluminum sheet for automotive applications," the Antitrust Division stated in a news release.
The federal agency alleges the combination would give Novelis control of 60% of the projected total domestic capacity and a large majority of uncommitted capacity, enabling it to raise prices and take other actions hurt automakers and "ultimately American consumers." Atlanta-based Novelis is a subsidiary of India's Hindalco Industries Ltd.
Novelis, which announced in July 2018 its intent to acquire Cleveland-based Aleris for $2.6 billion plus assumption of debt, responded to the Justice Department action by reaffirming its commitment to close the Aleris transaction. It claimed in a news release that the lawsuit is based on the contention that aluminum manufacturers are the only relevant competition for automotive body sheet "even though steel automotive body sheet is currently used for nearly 90% of the market."
"Our merger with Aleris threatens no one, and to the contrary will strengthen our ability to compete against steel," Novelis President and CEO Steve Fisher said in a statement.
The Justice Department said it has agreed with defendants to refer the matter to binding arbitration under certain conditions. The arbitration would resolve the issue of product market definition and be the Antitrust Division's first use of arbitration authority to resolve a matter.
In May Novelis reported net sales of $12.3 billion for fiscal 2019. In acquiring Aleris, Novelis would gain the company's 13 manufacturing facilities in North America, Asia and Europe, Novelis said.