U.S. holding company buys Aleris’ aluminum recyling unit for US$525M
Signature Group buying global recycling and specification alloys business, including Mississauga, Ont., facility
SHERMAN OAKS, Calif.—Signature Group Holdings, Inc. has entered an agreement to acquire the global recycling and specification alloys (GRSA) business of Aleris Corp., including a production facility in Mississauga, Ont., in a deal worth US$525 million.
According to Signature Group, the deal marks its entry into the aluminum markets in Europe and North America.
The GRSA unit is the largest independent aluminum recycler in the world, converting aluminum scrap and dross into usable metal and specification alloys in molten, ingot and other forms, Signature Group said in a statement.
“This deal is transformative for Signature in an industry I know well,” company chair and chief executive Craig Bouchard said in the statement.
“GRSA is the low-cost producer and clear market leader on two continents, with strong growth prospects and a sustainable competitive advantage. We are particularly pleased to inherit a blue chip customer base … It is an important step as we continue to build Signature into a significant and profitable company.”
Global recycled aluminum consumption is projected to grow 6.7 per cent annually over the next decade, according to estimates from business research firm the Freedonia Group, Inc., compared to 4.5 per cent growth in primary aluminum consumption.
Sectors like automotive, aerospace, packaging, building and construction are all experiencing increased aluminum consumption, with the automotive sector in particular consuming more aluminum as government mandates force automakers to find ways to boost fuel efficiency and reduce carbon emissions.
Aleris reported its GRSA had pre-tax earnings of US$74.9 million for the 12 months ending June 30.
Approximately 65 per cent of GRSA’s business is North American, while the remaining 35 per cent is sourced in Europe.
GRSA operates 24 facilities in six countries, including a specification alloy plant in Mississauga.
The deal will cost Signature Group US$495 million in cash and US$30 million in preferred stock.
It’s subject to customary closing conditions and regulatory approval.