Ta Chen Stainless Pipe Co (大成不銹鋼) yesterday said it plans to acquire Alumax Mill Products Inc for US$350 million in cash to increase its aluminum manufacturing capacity in the US and bypass heavy tariffs.
The acquisition of Alumax’s Texas plant would boost Ta Chen Stainless’ aluminum capacity by 11,000 tonnes per month, the company said.
The transaction is be completed in the second quarter of next year.
“US President Donald Trump’s imposition of steel and aluminum tariffs was a catalyst for this deal,” Ta Chen Stainless president Robert Shieh (謝榮坤) told a media briefing in Taipei.
“Ta Chen Stainless has been distributing imported [aluminum] in the US for the past 20 years,” he said. “With the manufacturing capacity [of Alumax], the company will build a complete aluminum supply chain in the US and be protected” from the tariffs.
Trump’s so-called “232 tariffs” were named for Section 232 of the Trade Expansion Act of 1962, which allows the US president to restrict imports for national security. Trump is to levy 10 percent tariffs on aluminum and 25 percent on steel imports from several of the US’ trading partners, including Taiwan.
The deal would also help Ta Chen Stainless reverse its disadvantageous position: It would benefit from the tariffs and anti-dumping investigations, Shieh said.
The Tainan-based firm would continue to explore opportunities to expand its capacity in the US, he said, adding that it is close to raising NT$20 billion (US$652.45 million) via a fundraising project to finance its overseas expansions.
Ta Chen Stainless manufactures stainless products in Taiwan and California, after it acquired Outokumpu Stainless Pipe Inc last year.
Alumax, which has 90 employees, originally made aluminum for cars and the aerospace industry, but a lack of competitiveness has idled its factory, Shieh said.
Ta Chen Stainless’ board of directors yesterday approved the Alumax acquisition via a newly formed subsidiary, TCI Texarkana Inc, which is fully owned by Ta Chen Stainless’ US subsidiary Ta Chen International Inc (TCI, 美國大成國際).
TCI is the biggest wholesaler of aluminum products in the US, with an 85 percent market share following the acquisitions of Galex Inc and Empire Resources Inc last year, the Ta Chen Stainless said.
About 89 percent of Ta Chen Stainless’ revenue of NT$64.42 billion came from the US last year, its annual report showed.
Aluminum products accounted for 39 percent of revenue, up from 26 percent in 2016, the report showed.
Aluminum products were the second-biggest revenue source after stainless products (43 percent), it added.
Ta Chen Stainless said it plans to use its cash flow generated by TCI and its bank savings to fund the Alumax acquisition.
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