Signature Group Holdings entered into a definitive stock purchase agreement to acquire the Global Recycling and Specification Alloys business of privately held Aleris for $525 million. In connection with the transaction, Goldman Sachs will lead a committed bridge financing with Deutsche Bank. GE Capital will provide a $175 million ABL facility to finance the growth of the company. Those commitments are contingent on the satisfaction of standard conditions.

This marks the entry of Signature into the resurgent aluminum market in North America and Europe. GRSA, the largest independent aluminum recycler in the world, is positioned to take advantage of improving fundamentals reshaping global aluminum markets. Sectors such as automotive, aerospace, packaging, building and construction are all experiencing increased aluminum consumption. The automotive sector, in particular, is consuming more aluminum as government mandates require reduced carbon emissions and compel auto manufacturers to increase fuel efficiency.

“This deal is transformative for Signature in an industry I know well,” said Craig Bouchard, chairman and CEO of Signature. “GRSA is the low-cost producer and clear market leader on two continents, with strong growth prospects and a sustainable competitive advantage. We are particularly pleased to inherit a blue chip customer base. This transaction fulfills a promise made to our stockholders to seek large, accretive, well-valued acquisitions. It is an important step as we continue to build Signature into a significant and profitable company.”

Signature expects to name Terry Hogan, currently senior vice president and leader of Aleris’ Recycling and Specification Alloys business in North America, as president of the GRSA business effective upon closing the acquisition. Russell Barr, VP and leader of Aleris’ recycling business in Europe is expected to serve as EVP, Europe.

“Terry and Russell are excellent managers and leaders with a strong team that is scalable to a larger platform,” stated Bouchard.

Global recycled aluminum consumption is projected to grow 6.7% a year over the next decade, compared to primary aluminum consumption at 4.5%, according to Freedonia Group.

GRSA is the global market leader in aluminum recycling, converting aluminum scrap and dross into usable metal and specification alloys in molten, ingot and other forms.

Signature expects to finance the acquisition with a combination of cash on hand, and the net proceeds from debt and equity financings. This includes the issuance of approximately $300 million of senior secured bonds in a private placement to qualified institutional buyers and certain non-U.S. persons, as well as a registered offering of Signature’s common stock, and a registered stapled rights offering of additional shares of its common stock to Signature stockholders at a date to be determined. A portion of the rights offering will be backstopped by Zell Credit Opportunities Fund, L.P., an affiliate of Equity Group Investments, a private investment firm founded by Sam Zell.

Deutsche Bank Securities acted as exclusive financial advisor, and Crowell & Moring acted as legal advisor, to Signature. Credit Suisse and KeyBanc Capital Markets acted as financial advisors, and Fried Frank acted as legal advisor, to Aleris.

Cleveland-headquartered GRSA represents approximately 30% of Aleris’ total revenues at $1.5 billion.