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Mainland Chinese Company Drops Bid to Acquire U.S. Aluminium Producer Due to Lack of Investment Approval

Zhongwang USA, a subsidiary of the mainland China-based Zhongwang International Group, has dropped its bid to acquire U.S. aluminium manufacturer Aleris Corporation after the Committee on Foreign Investment in the United States raised concerns last July about the potential national security implications of the deal. According to a statement by Aleris, the parties withdrew their CFIUS filing after these concerns were raised and decided to extend their merger agreement through 12 November to allow for additional discussions. Zhongwang USA added in a separate statement that the decision to abandon the merger “was driven by uncertainty related to the receipt of CFIUS approval from the United States government.”

The deal between Zhongwang USA and Aleris had faced intense opposition from a number of domestic interests, including labour groups and lawmakers. United Steelworkers, the largest industrial labour union in North America, urged CFIUS last May to reject the proposed acquisition in order to prevent mainland Chinese interests from gaining greater control over the aluminium industry and enhancing their access to key technologies.

Meanwhile, in a 9 June letter to Treasury Secretary Steven Mnuchin a group of House representatives stressed the importance of aluminium as a critical strategic material to U.S. national defence; suggested that Aleris’ research, development and technology could fall into the hands of the mainland Chinese military; and called attention to the current global excess capacity in the aluminium sector “that is largely driven by Chinese state-supported industrial policies.” The letter also made reference to an investigation by the U.S. Department of Commerce into Zhongwang’s alleged evasion through domestic subsidiaries of U.S. import duties. Additionally, the lawmakers contended that the company has been linked to massive aluminium stockpiling operations.

Content provided by Picture: HKTDC Research
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