May 2023

EU Approval of Alumetal Deal underlines Importance of Green Transition

Competition lawyers have said the European Commission’s decision to unconditionally approve Norsk Hydro’s €232 million acquisition of Alumetal after an in-depth review suggests the agency is anxious about deals affecting the bloc’s green transition.

The enforcer said in a statement yesterday that it has closed its seven-month Phase II probe into the acquisition after finding that the deal does not raise competition concerns.

Hydro and Alumetal produce aluminium foundry alloys, which are mainly used in the automotive industry to create vehicle parts. Alumetal makes these alloys from recycled materials, while Hydro relies on renewable energy for their production.

Hydro first notified the agency of its intention to acquire Alumetal under the EU’s simplified merger procedure last May, but withdrew the filing and renotified under the normal procedure in September.

A month later, the EU launched an in-depth probe, warning that the deal could threaten competition in the market for green aluminium foundry alloys. The acquisition could reinforce Hydro’s position in the sector and eliminate a growing competitor that can bring cheaper, recycled aluminium products to the market, it said.

The enforcer dismissed these concerns, noting that the parties only have “moderate” market shares and are “not close competitors” in the foundry alloy sector, which is home to various alternative suppliers and “green players”.

In a statement, EU competition commissioner Margrethe Vestager said that eco-friendly aluminium is key to decarbonising the industrial process. The commission’s probe concluded the acquisition will not have a negative impact on the competitive landscape for green aluminium products, which will remain widely available to customers at competitive prices, she added.

Hydro said in a statement yesterday that its initial offer to purchase Alumetal expired during the commission’s investigation, but it made a new offer last week and the company hopes to close the deal in July.

O’Melveny & Myers of counsel Christian Peeters, who was counsel to Hydro, said that this is “a good day for the good guys”, noting the firm has worked closely with the commission for 15 months to help it assess a previously unexplored sector.

Omar Diaz at Bonelli Erede in Brussels said that the commission is likely to pay closer attention to deals affecting green supply chains, since enforcers are understandably on the watch for bottlenecks and gatekeepers that could slow down the decarbonisation of the economy.

James Webber, a partner at Shearman & Sterling in London, said that the “unusual” procedure has vindicated Norsk Hydro’s original view that the tie-up did not raise competition concerns, and perhaps reflects some bad luck on the commission’s part in obtaining relevant data.

The acquisition coincided with “acute commission anxiety” about access to materials for the green transition, Webber said.

Stéphane Dionnet, a partner at McDermott Will & Emery in Brussels, said it is reassuring that the initiation of an in-depth investigation does not necessarily lead to the adoption of a statement of objections.

This case shows that the in-depth investigation provides the necessary extra time for the parties and the commission to reach a successful outcome, he said.

Counsel to Alumetal

Co-Head of Corporate/M&A and Partner Wojciech Fabrycki
Partner Tomasz Kudelski
Associate Aleksandra Rogalska
Head of Compliance Jeremiasz Kuśmierz

Counsel to Norsk Hydro

O’Melveny & Myers
Partner Riccardo Celli, Christian Peeters, Philippe Noguès, Rebecca Evans, Jéssica Nemeth and Katharina Weiss

Freshfields Bruckhaus Deringer
Partners Frank Montag and Andreas von Bonin in Brussels, Tuna Tanik, Reinout Leys, Ruzica Ciric and Hannah Bogaert

Full version by Alex Bagley originally published 05 May 2023 in Global Competition Review