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Coming Out Stronger

December 17, 2012

The road to hell is paved with good intentions as the saying goes. That can well describe the company Aleris International, Inc. The firm came into being with the merger of Commonwealth Industries, Inc. and IMCO Recycling, Inc. in 2004. This merger created a vertically integrated aluminum company having manufacturing as well as recycling components. Aleris was traded in the New York Stock Exchange.

The business grew under a combination of operational improvements, strategic acquisitions and organic growth. Aleris did not shy away from acquiring sizeable companies. Corus Group plc was purchased in 2006 to the tune of $900 million. This acquisition doubled the size of the firm and enlarged its presence in China and Europe. In addition aside from that transaction, Aleris outlaid $560 million for acquisitions between 2005 and 2008. In order to focus on its core business of aluminum the company sold a zinc business in 2007.

Aleris which is based in Beachwood, Ohio, became a private company in 2006 when it was acquired by Texas Pacific Group (TPG). The financial meltdown of 2008 had a terrible effect on Aleris. The crisis brought a slowdown on demand with volumes dropping almost 40 percent based year-over-year. The price of aluminum dropped and cash flow turned negative. It didn’t help that there was heavy debt servicing from TPG.

For all its good intention of expansion and acquisitions, it all crumbled in the face of the financial tsunami. TPG’s high debt did not help. Aleris had no recourse but to file for bankruptcy under Chapter 11 of the United States Bankruptcy Code.

After completing its financial and operational restructuring the company came out of bankruptcy on June 1, 2010. TPG was no longer part of the company. New equity investors came in headed by Oaktree which is the majority-owner. As a result Aleris has come out stronger with a solid balance sheet and little debt.

Despite filing for bankruptcy, the company was able to get new investors. It deals with aluminum which is used in everything from recycled aluminum soft drink cans, air planes with aluminum wings, and aluminum bodied bullet rains. Hence it products are very much in use for everyday living.

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