By Sonja Elmquist
Aleris Corp. (ARS), the aluminum maker owned by Oaktree Capital Management LP, agreed to sell its recycling unit to Signature Group Holdings Inc. (SGGH) for $525 million in cash and stock.
Global Recycling and Specification Alloys is the largest independent recycler of aluminum, Sherman Oaks, California-based Signature said today in a statement. The growth in recycled aluminum consumption is expected to outpace primary aluminum for the next decade, it said.
“The momentum of increased aluminum consumption in the transportation sector borders on a mega-trend,” Signature Chairman and Chief Executive Officer Craig Bouchard said today by e-mail. Signature, an investment company, will pay $495 million in cash and $30 million in preferred stock to closely held Aleris.
Aluminum sheet use in the auto industry may grow 20-fold by 2025 compared with 2012, according to Ducker Worldwide LLC, a Troy, Michigan-based consultant. U.S. carmakers such as Ford Motor Co. are shifting to aluminum from steel for some parts as stricter emissions regulations drive them to cut weight.
The sale includes 18 production facilities in North America and six in Europe. Signature expects to issue $300 million of senior secured bonds as well as hold an equity offering, with Goldman Sachs Group Inc. and Deutsche Bank AG providing bridge financing, the company said.
Aleris, which postponed a planned initial public offering in 2012, is focusing on customers in the automotive and aerospace industries. In September, the Cleveland-based company announced it would spend $350 million to expand its capacity to produce sheets of aluminum used in automotive bodies.
Los Angeles-based Oaktree, the world’s biggest distressed-debt investor, has a 60 percent shareholding in Aleris, according to a March filing. Credit Suisse Group AG and KeyBanc Capital Markets Inc. acted as financial advisers to Aleris and Fried, Frank, Harris, Shriver and Jacobson LLP gave legal advice.
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