Corus In Talks To Sell 2 Aluminum Smelters To Klesch

LONDON, Nov 17, 2008 (Dow Jones Commodities News via Comtex) -- Corus, the European arm of India-based Tata Steel Ltd. (500470.BY), said Monday it has signed a non-binding letter of intent to sell two aluminum smelters to a unit of London-based Klesch & Co., one of the biggest private-equity firms in the metals industry. The letter of intent concerns the disposal of two smelters located in Delfzijl, Netherlands, and Voerde, Germany, that have a combined production capacity of more than 200,000 metric tons of primary aluminum a year. The non-binding letter of intent allows the two companies to start negotiations and due diligence. A final deal will only be reached once it has gained approval from both Corus and Klesch's board of directors. It also requires European Union regulatory approval and other regulatory clearances. There is no timeline set for reaching an agreement. Corus is Europe's second-largest steelmaker by volume and was acquired by Tata Steel last year. It sold its downstream aluminum extrusions and rolling business to Aleris in August 2006 and has since been looking to sell the two remaining smelters. Corus previously signed a non-binding letter of intent with American Industrial Acquisition Corporation to sell the two smelters in December 2007 but ended talks in August 2008. It also announced preliminary talks with Klesch in the same month. A. Gary Klesch, head of Klesh, said he wouldn't need to raise funds from third parties since the private equity firm intends to use its own funds to make the investment. Klesch said the recent downturn in the aluminum market represents a good buying opportunity for investors like him. "It makes sense to buy now rather than" when prices are high, he said. Klesch has two other aluminum investments. The private equity firm bought Zeeland Aluminium Company in Vlissingen, Netherlands, for an undisclosed sum in June 2007. The plant is able to produce 260,000 tons of primary aluminum metal a year. Klesch also invested in a project to build a 725,000-ton-a-year primary aluminum smelter in Libya. Benchmark aluminum prices have fallen to $1,890 a metric ton on the London Metal Exchange - the lowest in over three years and 44% below its all-time high of $3,380.15 a ton reached this summer. Aluminum prices have suffered as automakers, key aluminum consumers, have seen sales plummet due to the current financial crisis and global economic downturn. Aluminum companies such as U.S.-based Alcoa Inc. (AA), the world's largest aluminum producer, and China's largest aluminum giant, Aluminum Corp. of China Ltd. (ACH), or Chalco, have announced production cuts to realign supply with demand, but some analysts still predict a surplus this year and next year.