CHICAGO Constellium N.V.
aims to expand its aerospace capacity, make inroads in the U.S.
automotive aluminum sector and play a role in the growing
Chinese canstock market as it looks to expand its global
footprint, chief executive officer Pierre Vareille told
The Paris-based downstream
aluminum products maker, which began trading on the New York
Stock Exchange May 23, will use the money raised from its
initial public offering (IPO) to fund organic growth in 2013
and 2014 and new projects in 2015 and 2016, Vareille said in an
The IPO, which also will take
place on NYSE Euronext Paris beginning next week, is set to
close on or about May 29 and, according to Vareille, is
expected to net an estimated $383 million.
While money raised from the IPO
has obvious benefits when it comes to funding projects, perhaps
the chief advantage of going public is increased visibility for
Constellium, Vareille said. "We are a European-based company,
but we want to be known globally. And we think there are huge
opportunities in the U.S. and also in China."
In the United States,
Constellium is looking to increase its participation in the
automotive sector, Vareille said. The company already operates
two "small plants" in Novi and Van Buren Township, Mich., but
would like to grow its automotive manufacturing capabilities as
German automakers and suppliers expand in the southeastern
United States and as the Detroit-area "Big Three" increasingly
use aluminum, he said.
Vareille called Dearborn,
Mich.-based Ford Motor Co.s decision to use more aluminum
in its F-150 pickup truck a "tipping point."
"There will be a huge
opportunity for players in this industry in the years to come
in the U.S.," he said. "Previously, aluminum was in the most
expensive, low-production cars. Its flowing into
mass-production cars, and its happening now."
Constellium has not decided
exactly when or where it might add automotive aluminum capacity
in the United States, Vareille said. "If we were to increase
our presence in this country, we would look at many locations.
It could be Michigan. It could be other places. Its too
early to say."
More immediately, Constellium is
looking to boost its aerospace capacity organically to meet
"several very significant contracts" recently awarded by Airbus
SAS and to meet long order backlogs at both Airbus and Boeing
Co. Constellium thinks it has the right manufacturing footprint
for aerospace at present, Vareille said, but could add more
capacity if necessary in the United States, France or
production facilities are all in Europe, Vareille noted. The
company sees the U.S. market as developed, with aluminum
already dominating the can sector, but in Europe there is still
opportunity for aluminum to replace steel in cans, particularly
in Eastern Europe.
The real opportunity for
canstock, however, is in China, where consumers are only now
switching from glass and plastic containers. If Constellium
were to enter the Chinese market for canstock, it would seek a
local partner, Vareille said. "China is still uncharted
Among the things that dont
keep Vareille up at night are aluminum prices, the European
economy or material substitution, he said.
Constellium looks either to make
"back-to-back" deals with consumers so that they pay the same
prices as Constellium does for metal, or use derivatives to
accomplish essentially the same thing. "We are immune to the
variation in the aluminum price," Vareille said, noting that
Constellium instead banks on conversion fees for high
And while Constellium may be
based in Europe, that regions slowdown isnt
weighing down the company due to its locations elsewhere and
the global nature of the markets it serves. "So we are also
immune to the issues that the European economy could face," he
As for material substitution,
Constellium has developed an aluminum-lithium alloy that
Vareille described as a "very good weapon" against composites
in the aerospace sector. And in the automotive market,
composites remain too pricey for mass-produced vehicles. "If
you have a high-volume car, switching to composites implies a
lot of capex. But switching from steel to aluminum is pretty
easy," he said, noting that much of the same stamping equipment
can be used for both metals.
Neither is Constellium overly
worried about new entrants in a downstream aluminum market that
the company is "very bullish" about. Vareille reasoned that it
would take another company about $1 billion to build anything
of similar scale or complexity to its facility in Ravenswood,
And even thats not enough,
he said. "You have to be very technically oriented to make the
plants run, get qualified by customers and so on. So we think
it is best for us to focus on our three markets (aerospace,
automotive and packaging) and really be the best in the world,"
The companys IPO included
22.2 million class A ordinary shares at a lower-than-expected
price of $15 apiece. The company previously said it expected
the shares to price at between $17 and $19 apiece (
amm.com, May 20).
Constellium is offering about
13.3 million class A ordinary shares, while the selling
shareholders are offering about 8.9 million class A ordinary
shares. Of the shareholders contribution, about 5 million
are being sold by affiliates of Apollo Global Management and
3.9 million are being sold by affiliates of Rio Tinto Plc, the