On October 1 2007 Norsk Hydro ASA (Hydro) merged its oil and gas activities with Statoil ASA to form StatoilHydro ASA (StatoilHydro). Following the merger Hydro continues as a focused aluminium company. All shareholders in Hydro received 0.8622 shares in StatoilHydro for each share they held in Hydro. The shareholding in Hydro remained unchanged as a result of the merger. The StatoilHydro shares were distributed to Norwegian shareholders as of October 3, 2007 and to holders of Hydro's American Depositary Receipts in the U.S. as of October 10, 2007.
A brief description of the tax treatment of the merger is given below. Hydro urges all shareholders to seek advise from their own tax advisors for their particular tax situation. Shareholders are also advised to read page 59-67 in the attached merger prospectus outlining the material tax consequences of the merger.
Norwegian shareholders
Norwegian shareholders’ tax positions in the Hydro shares will be split between the Hydro shares (30 percent) and the received StatoilHydro shares (70 percent). As Hydro's shareholders receive 0.8622 StatoilHydro shares for each Hydro share, the actual percentage of the orginal cost basis in the Hydro share allocated to one StatoilHydro share is 81.19 percent (70 percent divided by 0.8622). The number of Hydro shares remain unchanged and therefore 30 percent of the original cost basis is to be allocated to the Hydro shares.
It has been indicated to Hydro that the Directorate of Taxes has used a wrong adjustment factor in the distribution between Hydro and StatoilHydro. The adjustment factor used in the tax list (beholdningsoppgaven) is 83,78%, while the correct is 81,19%. The mistake has been corrected with the Directorate of Taxes, but a new stock list will not be sent out (except for shareholders owning 5000+ shares).
U.S. shareholders
The receipt of StatoilHydro (STO) shares will in the U.S. be taxed as dividend. The value of the dividend will be equal to the fair market value of the StatoilHydro shares when they are received. As such the cost basis for the Hydro (NHYDY) shares remain unchanged. The cost basis for the StatoilHydro shares is equal to the fair market value of the StatoilHydro shares when they are received.
UK shareholders
The original cost basis of the Hydro shares will be attributed to the new
holding and, if necessary in calculating future capital gains, will be allocated between the separate holdings of StatoilHydro and Hydro shares by reference to their market values on the first day on which market values are quoted for such shares meaning October 1, 2007.
French shareholders
Please contact Pål Kildemo, phone +47 970 96 711, email: pal.kildemo@hydro.com
Canadian shareholders
The receipt of Statoil shares by Canadian shareholders in the context of the above-mentioned merger should be considered a non-taxable event for Canadian tax purposes such that no income or gain should be attributed to the Canadian shareholders as a result thereof. The adjusted cost base of Hydro shares should remain unchanged. The adjusted cost base of the newly issued Statoil shares should be nil. Please see the attached document in the right column.
