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Norsk Hydro: Hydro acquires Sapa to create a global aluminium champion

/EIN News/ -- Norsk Hydro has agreed with Orkla to acquire its 50 percent interest in Sapa for a total enterprise value of NOK 27 billion, giving full ownership in the global leader in extruded aluminium solutions and making Hydro a leading force in the global aluminium industry.

Transactional highlights

  • Binding agreement to acquire Orkla's 50% interest in Sapa
  • Sapa enterprise value NOK 27 billion
  • Accretive to earnings and strong cash generation from Sapa from day 1
  • Synergies of NOK 200 million per year, mainly related to remelt and recycling
  • Sapa to become new business area in Hydro, named Extruded Solutions
  • Anticipated closing of the transaction in second half 2017
  • Strong strategic rationale
    • Global leadership: worldwide production and customer offering, with unparalleled technological capability
    • Growth: capability and freedom to grow in the most attractive areas of global aluminium 
    • Infinite solutions: responsible operations and sustainable solutions for the future low-carbon economy

"Hydro is now confirming its position as the world's leading integrated aluminium company and the transaction reinforces our strategic direction Better, Bigger and Greener, with a solid asset base, unique competencies and capabilities from mining to end-user products," said Svein Richard Brandtzæg, President and CEO in Hydro. "Sapa will enable us to assume global leadership, establish a platform for growth, and provide responsible operations and sustainable solutions for the future low-carbon economy."

The combination will make Hydro the only global company in the aluminium industry that is fully integrated across the value chain and markets. Hydro will have unparalleled strength in technology, R&D, innovation and product development, as well as an unmatched product and service offering to the benefit of more than 30,000 customers throughout the world.

After Hydro and Orkla combined their aluminium extrusion assets in 2013, the two companies have consistently supported the Sapa joint venture's impressive progress towards higher performance and value creation through streamlining and improving its global operations.

Global reach, local presence
Following the transaction, Hydro will become a global, integrated aluminium company with more than 35,000 employees, and activities in around 40 countries. Hydro's rolled products business has a strong market presence throughout product segments in Europe. Sapa is the global extrusion champion, with strong market shares in North America and Europe, and is the global leader in precision tubing.

Hydro also has solid market presence in metal products across the value-added metal product categories in Europe, North-America and Asia, and is Norway's second-largest producer of renewable hydropower. With long positions in bauxite and alumina, Hydro is among the global leaders in the third-party bauxite and alumina market outside China.

"Sapa has successfully restructured its business and lifted profitability and is now well-positioned to continue its journey as part of Hydro, aiming for even higher value creation through targeting high-tech, high-competence value-add market segments," Brandtzæg said.

The transaction will be financed through cash positions and issuance of bonds in Norwegian and international markets, and will be temporarily funded by committed undrawn credit lines. Following the transaction, Hydro is committed to retain its investment grade rating and a robust balance sheet. Hydro will maintain its dividend policy of returning 40 percent of net income over the cycle, with NOK 1.25 per share seen as a floor in 2017.

The purchase price will be paid in cash at completion, adjusted for net debt and normalized working capital.

Completion of the transaction is subject to approval from relevant competition authorities, and is expected in the second half of 2017.

Description of acquired assets
Formed as a 50/50 joint venture between Orkla and Hydro in 2013, Sapa is a highly successful aluminium solutions provider and the world's largest extrusion company. Sapa operates within the business areas Extrusion Europe, Extrusion North America, Precision Tubing and Building Systems, has 22,400 employees and is present in 40 countries.

Key financial figures for Sapa (100 % basis) (unaudited)
In NOK million, except sales volumes

  Q1 2017 Q1 2016 Year 2016 Year 2015 Year 2014
Sales volume (1000 mt) 355 349 1,365 1,363 1,399
Total Revenues 14,337 13,919 53,430 55,397 46,377
Reported EBIT 856 655 2,420 528 -317
Reported net income (loss) 625 418 1,779 246 -626
Underlying EBITDA 1,100 901 3,498 2,729 1,916
Underlying EBIT 778 571 2,197 1,407 652
Underlying net income (loss) 562 365 1,553 907 398
Total assets 28,628 28,204 25,939 28,870 27,629
Total equity 14,567 12,828 13,800 12,871 11,538
Total liabilities 14,060 15,376 12,139 15,999 16,091

Sapa Board of Directors and management team
At the date of this announcement, Sapa's Board of Directors consists of six persons. The Board of Directors is presented in the table below. After the completion of the transaction, Hydro will own 100% of Sapa and will as a consequence change the board composition of the company.

Name Position
Peter A. Ruzicka Chairman of the Board
Eivind Kallevik Board member
Anne-Lene Midsheim Board member
Terje Andersen Board member
Kenneth Hertz Board member
Tor Egil Skulstad Board member

At the date of this announcement, Sapa's management team consists of 10 individuals. The management team is presented in the table below.

Name Position
Egil Hogna President & CEO
Karl Eichinger EVP & CFO
Katarina Nilsson EVP HR & Organization
Florian Krumbacher EVP & General Counsel
Rafael Fuertes EVP Strategy & Innovation
Erika Ahlqvist EVP Communication & CSR
Charlie Straface EVP & Business Area President - Extrusion North America
Sergio Vendrasco EVP & Business Area President - Precision Tubing
John Thuestad EVP & Business Area President - Extrusion Europe
Salvador Biosca EVP & Business Area President - Building Systems

There are customary retention agreements in place for Sapa's management team. The total cost of the retention arrangements is estimated to approximately NOK 20 million. Orkla and Hydro have agreed to share the retention costs.

Indicative timeline
Signing of share purchase agreement (SPA): July 10, 2017
Publication of Information Memorandum: Within 30 working days after signing of SPA
Competition approvals required for closing: Brazil, Canada, China, EU, Turkey
Close of transaction: Expected in second half 2017
Financing activities: Second half 2017/2018  

Press conference, analyst and investor presentation and conference call
July 10, 09:00 CET: Press conference and analyst and investor presentation with webcast (in English) at Hydro' Oslo headquarters. Link to webcast will be made available on

July 10, 15:00 CET: Telephone conference for the international financial market. Phone-in details will be made available on

Financial and legal advisors
Morgan Stanley has provided Hydro's Board of Directors with a fairness opinion for the transaction, while Wikborg Rein acted as Hydro's primary legal advisor.


Hydro is a global aluminium company with production, sales and trading activities throughout the value chain, from bauxite, alumina and energy generation to the production of primary aluminium and rolled products as well as recycling. Based in Norway, the company has 13,000 employees involved in activities in more than 40 countries on all continents. Rooted in more than a century of experience in renewable energy production, technology development and progressive partnerships, Hydro is committed to strengthening the viability of the customers and communities we serve.

Investor contact
Contact Stian Hasle
Cellular +47 97736022

Press contact
Contact Erik Brynhildsbakken
Cellular +47 41751271

Cautionary note
Certain statements included in this announcement contain forward-looking information, including, without limitation, information relating to (a) forecasts, projections and estimates, (b) statements of Hydro management concerning plans, objectives and strategies, such as planned expansions, investments, divestments, curtailments or other projects, (c) targeted production volumes and costs, capacities or rates, start-up costs, cost reductions and profit objectives, (d) various expectations about future developments in Hydro's markets, particularly prices, supply and demand and competition, (e) results of operations, (f) margins, (g) growth rates, (h) risk management, and (i) qualified statements such as "expected", "scheduled", "targeted", "planned", "proposed", "intended" or similar.

Although we believe that the expectations reflected in such forward-looking statements are reasonable, these forward-looking statements are based on a number of assumptions and forecasts that, by their nature, involve risk and uncertainty. Various factors could cause our actual results to differ materially
from those projected in a forward-looking statement or affect the extent to which a particular projection is realized. Factors that could cause these differences include, but are not limited to: our continued ability to reposition and restructure our upstream and downstream businesses; changes in availability and cost of energy and raw materials; global supply and demand for aluminium and aluminium products; world economic growth, including rates of inflation and industrial production; changes in the relative value of currencies and the value of commodity contracts; trends in Hydro's key markets and competition; and legislative, regulatory and political factors.

No assurance can be given that such expectations will prove to have been correct.  Hydro disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

This information is subject to the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act.


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