Target: Aleris International (NYSE: ARS)
Sponsor: Texas Pacific Group
Purchase Price: $3.3 billion
Advisor: Sponsor: Deutsche Bank; Target: Citigroup Global Markets
Legal Counsel: Sponsor: Cleary Gottlieb Steen & Hamilton; Target: Fried Frank Harris Shriver & Jacobson
TPG will contribute approximately $1.7 billion in cash and will assume or repay roughly $1.6 billion of existing debt. Neither party disclosed any particulars of the debt structure used in the deal, but people familiar with the transaction describe the debt component as standard.
TPG became interested in Aleris in part throgh the firm’s familiarity with the company’s Chairman and CEO Steven Demetriou, who sits on the board of directors at TPG portfolio company Kraton Polymers.
Demetriou had previously served as president and CEO of chemicals company Noveon, and from there went on to serve in the same capacity at Commonwealth Industries. Aleris took its present form when Imco Recycling merged with Commonwealth in a 2004, $175.5 million deal that vaulted Demetriou into the top post of the combined company, later renamed Aleris.
With Demetriou at the helm, the company continued to grow through acquisitions and people familiar with the deal say that this strategy will be replicated during TPG’s ownership.
Since the Imco and Commwealth merger, Aleris has made five additional acquisitions. A week prior to TPG’s deal, Aleris closed on its purchase of the aluminum division of London’s Corus Group for $887 million. Within the past year, Aleris acquired Cleveland-based aluminum recycler Alumitech, metal products provider Alsco Metals, Sao Paulo-based recycling operator Tomra Latasa Reciclgem and assets from Ohio-based recycler Ormet Corp.
The deals have translated into significant growth in revenues. For the first half of 2006, the company reported roughly $1.9 billion in revenues, representing a nearly 60% increase over its year-earlier performance. Aleris generated $102.6 million of operating income in the second quarter.
Texas Pacific Group has developed a thirst for commodities companies through its industrial portfolio. Last month the firm completed a $1.04 billion purchase of Altivity Packaging, the former consumer packaging arm of Smurfit-Stone Container Corp. Last year, TPG led a consortium to buy Texas Genco Holdings, the wholesale power generation unit of CenterPoint Energy, for $3.65 billion. And TPG is also among those interested in acquiring BOC Edwards from U.K. industrial gasses company BOC, according to The Financial Times Deutschland. —M.S.