Norsk Hydro AS Norsk Hydro: Hydro Acquires Sapa To Create A Global Aluminium Champion

 
TIDMNHY 
 
 
   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. 
 
   Transaction 
 
   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 www.hydro.com. 
 
   July 10, 15:00 CET: Telephone conference for the international financial 
market. Phone-in details will be made available on www.hydro.com. 
 
   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 [phone] 
 
   E-mail [e-mail] 
 
   Press contact 
 
   Contact Erik Brynhildsbakken 
 
   Cellular [phone] 
 
   E-mail [e-mail] 
 
   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. 
 
   Hydro acquires Sapa: http://hugin.info/106/R/2119234/807073.pdf 
 
   This announcement is distributed by Nasdaq Corporate Solutions on behalf 
of Nasdaq Corporate Solutions clients. 
 
   The issuer of this announcement warrants that they are solely 
responsible for the content, accuracy and originality of the information 
contained therein. 
 
   Source: Norsk Hydro via Globenewswire 
 
 
  http://www.hydro.com/en/?WT.mc_id=Pressrelease 
 

(END) Dow Jones Newswires

July 10, 2017 01:00 ET (05:00 GMT)

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