Ara Partners has acquired a rare earth magnets company from Apollo Global Management that will “drive the decarbonisation of transportation” in North America.
Vacuumschmelze (also known as VAC) produces magnetic alloys of rare earth metals that can be used in electric vehicles, industrial processes and sectors such as clean energy generation, medicine and aerospace. These magnets are “critical to the energy transition”, according to Ara’s announcement. “[Its] permanent magnets are used to make electric motors more powerful and more energy-efficient than conventional induction motors,” Ara Partners’ Tuan Tran, who led the deal, told New Private Markets.
Tran said Vacuumschmelze will “drive the decarbonisation of transportation” and described it as a “key enabler of electrification and energy efficiency across massive global industries”.
The company, headquartered in Germany, is building a manufacturing facility in North America to supply General Motors for its electric vehicle products. It procures rare earth materials from geographies including China, Malaysia and Slovakia, according to the company’s website, but this North American facility will use “locally sourced raw materials”, Tran told NPM.
“The vast majority of this [rare earth magnets] supply stream, from upstream production to alloy processing to downstream permanent magnet manufacturing, has been concentrated in China, which has caused challenges,” Tran continued. “VAC is the only supplier of rare earth magnetic materials for EVs in the Western hemisphere.” The company and Ara Partners are “committed to scaling a Western supply chain” for these metals, said Tran.
VAC is a carve-out from OM Group, which Apollo acquired in a take-private transaction in 2015. Apollo has split OM Group into three companies, of which Vacuumschmelze is the last to be sold, a source familiar with the transaction told NPM. Ara Partners has not disclosed where the capital for this acquisition came from. The firm is in market with its third flagship industrial decarbonisation growth equity fund, which is nearing its $2 billion target, NPM previously reported.