Aluminium Dunkerque smelter in Liberty, AIP ownership tussle

An ownership tussle has erupted between Liberty Group and private equity company American Industrial Partners Capital Fund VII over the rights to Aluminium Dunkerque, Europe's largest primary aluminum smelter, located in Loon-Plage, northern France, and part of GFG Alliance's Alvance Aluminium subsidiary.

AIP stated Oct. 1 that through a wholly owned subsidiary it has acquired ownership of the Aluminium Dunkerque smelter. The acquisition was completed through the foreclosure on the shares of Liberty France Industries 1, which were pledged to affiliates of AIP under mezzanine financing arrangements previously provided to Aluminium Dunkerque, due to ongoing payment and other defaults, it said.

"As a result, AIP is now the legal and beneficial owner of three legal entities in France: Liberty Industries France SAS, Alvance Aluminium Dunkerque SAS and Alvance Aluminium Service SAS," AIP said in a statement sent to S&P Global Platts. "These three French companies own and operate Aluminium Dunkerque."

'Well below market value'

A GFG Alliance spokesperson countered in a statement sent to Platts that: "GFG has offered to repay AIP debt through a committed third party refinancing. AIP has instead used its loan-to-own model to orchestrate an asset take over for what is well below market value. GFG Alliance will defend its position and its interests vigorously."

AIP's swoop comes as aluminum prices continue around a 13-year high amid growing demand and smelter cutbacks in major producing nation China. The LME cash price was quoted at $2,870/mt late Oct. 1, up 0.45% day on day.

Sources understood to have knowledge of the matter told Platts that AIP had offered GFG Alliance a loan and purchase structure for certain Alvance Aluminium assets and that equity and jobs may also have been offered to a member of the GFG deal team negotiating that structure.

The sources also indicated that other bids and submissions of interest made for the same assets were well in excess of the values put forward by AIP.

An AIP representative declined to comment on the suggestions of asset undervaluation.

Refinancing with traders

The disagreement over the smelter's ownership follows confirmation in July by global commodities trader Trafigura that it had been involved in a debt refinancing arrangement with Alvance Aluminium and that it would continue to supply alumina to the Dunkerque smelter under contract.

This refinancing was reportedly part of a move to ensure the continued smooth operation of the aluminum complex after the collapse of GFG Alliance's major financier, Greensill Capital, in March, which resulted in a cash-squeeze throughout the group. Three smaller French units of Alvance Aluminium entered judicial administration in late April.

Informed sources told Platts at the time that trader Glencore had purchased Trafigura's debt in the smelter.

Glencore declined to comment when approached by Platts Oct. 1, and Trafigura did not immediately respond to requests for comment.

AIP said its ownership of Aluminium Dunkerque has been fully approved by the Bureau du Contrȏle des Investissements Etrangers en France (the FDI). AIP's actions have also been completed in full compliance with applicable European Union merger regulations, it said.

Founded in 1991, Aluminium Dunkerque has 285,000 mt/year capacity, specializing in the manufacture of aluminum slabs and ingots, used in the transport, automotive, aerospace, packaging, building and construction industries. The smelter was acquired by Liberty Group from Rio Tinto in 2018 for around $500 million, becoming part of Alvance Aluminium Group.

Alvance also has a smelter at Alvance British Aluminium in Lochaber, Scotland, and downstream products producer Alvance Aluminium Duffel in Belgium, purchased from Novelis in 2019. The group's total aluminum products production capacity is put at nearly 600,000 mt/year currently.

AIP added in its statement that on July 7 independent administrators for the UK holding company that previously owned Aluminium Dunkerque were appointed by the English High Court of Justice in the UK.

"The purchase consideration for Aluminium Dunkerque will be determined in due course by an independent valuation conducted in Luxembourg by a suitably qualified valuation firm. Upon confirmation of the value, the corresponding sum will be applied as a reduction to the mezzanine debt otherwise owed to AIP," the private equity company said.

Existing leadership team

AIP said it intended to operate Aluminium Dunkerque together with the existing local leadership team and does not anticipate any disruption to normal operations of the business, including for customers, suppliers and employees. AIP expects to provide additional capital to support the business going forward and is represented by Jones Day, Baker Botts and Messier & Associés in this matter, it said.

A private equity investor since 1989, AIP has completed over 100 transactions to date. It said it currently has more than $7 billion of assets under management on behalf of leading pension, endowment and financial institutions.