Hydro Acquires Sapa for Global Aluminum Position

Sapa’s President & CEO Egil Hogna is at left, Hydro’s chief executive Svein Richard Brandtzæg stands at center, and Peter A. Ruzicka, our board chairman and Orkla’s chief executive, at right.

(Press release)

Norsk Hydro has agreed with Orkla to acquire a 50 percent interest in Sapa for approximately $3.2 billion. Highlights of the transaction include:

  • 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’ 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.

 

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