ARS Aleris Corp. Common Stock

A dozen U.S. senators asked the Obama administration to block a Chinese company's $1.1 billion bid to take over a U.S. aluminum manufacturer, a deal that had surprised many U.S. aluminum-industry officials who have grown concerned about competition from China.

Zhongwang USA LLC in August agreed to buy Cleveland-based Aleris Corp. from its private-equity owners in a deal that would mark the highest price ever paid by a Chinese firm for a U.S. metals producer. Liu Zhongtian, who controls Zhongwang USA and is also founder and chairman of Chinese aluminum giant China Zhongwang Holdings Ltd., said the deal would offer a "complementary business foothold" for his operations in America.

In a letter sent Wednesday to Treasury Secretary Jack Lew, the senators said the deal should be rejected because it would "directly undermine our national security, including by jeopardizing the U.S. manufacturing base for sensitive technologies." The senators, including Ron Wyden (D., Ore.), the ranking member of the Senate finance subcommittee that oversees trade, Charles Schumer (D., N.Y.), and Rob Portman (R., Ohio), said Chinese policies that have harmed America's industrial base "have been implemented and utilized by Zhongwang."

The letter said Treasury's Committee on Foreign Investment in the U.S., which can recommend blocking or modifying foreign investments on national security grounds, should take into account when a foreign investment deal "creates potential for military know-how and sensitive technology to be transferred to China's government." Aleris, which has 14 plants around the world and annual revenue of about $3 billion, has supplied aluminum plate used by the U.S. military, including for armored vehicles.

A spokesman for Aleris didn't immediately provide a response to a request for comment. A Zhongwang spokeswoman said the deal "will bring in additional resources and capital" to Aleris, which will "continue to be run independently."

Zhongwang USA is an investment company owned by Zhongwang International Group Ltd., the parent company of China Zhongwang.

The Wall Street Journal reported last week that eight U.S. senators asked the Obama administration to take action against China over what they say are unfair subsidies to the Chinese aluminum industry.

Based in eastern China, China Zhongwang is one of the world's biggest makers of aluminum extrusions, hollowed-out or molted metal used to make goods such as car parts, appliances and window frames.

Mr. Liu and China Zhongwang were the subjects of a page-one Journal article in September detailing allegations that firms linked to the company's founder, Mr. Liu, routed aluminum through Mexico in an effort to disguise its origin and avoid U.S. tariffs. Mr. Liu denied any connection to the Mexico metal.

In September, the Journal reported that the Commerce Department is investigating whether a New Jersey company, Aluminum Shapes LLC, imported aluminum pallets from China Zhongwang and then used the metal for other products as a way to avoid punitive tariffs. Aluminum Shapes said it was only storing the metal and denied using it for any purpose.

Last week, the Journal reported that the Department of Homeland Security is investigating whether U.S. companies linked to Mr. Liu illegally avoided punitive aluminum import tariffs. China Zhongwang said it isn't aware of the investigation and that it follows established trade laws.

Other signatories of Wednesday's letter include Robert Casey (D., Pa.), Joe Manchin (D., W. Va.), Kirsten Gillibrand (D., N.Y.), Joe Donnelly (D., Ind.), Debbie Stabenow (D., Mich.), Jeffrey Merkley (D., Ore.), Amy Klobuchar (D., Minn.), Tammy Baldwin (D., Wis.). and Al Franken (D., Minn.).

Write to Scott Patterson at scott.patterson@wsj.com

(END) Dow Jones Newswires

November 02, 2016 14:25 ET (18:25 GMT)

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