The agreement covers Profiles (Profiles) and Building System (Construction Systems), in addition to Extruded and Welded Tubes (Extruded and Welded Tubes), belonging to Sapa, Orkla's wholly owned subsidiary, and the entire Extruded Products business area of Hydro.
Based on the 2011 data, the new company will have an annual revenue of approximately NOK 47 billion, an underlying EBITDA of around NOK 1.9 billion and around 25,000 employees *. The new company will occupy a leading position in Europe and North America and will have a strong presence in emerging markets, such as Brazil, Argentina, China, India and Vietnam.
The transaction is expected to be completed during the first half of 2013, after approval by the competent competition authorities. Svein Tore Holsether, currently chairman of Sapa, will be chairman of the new company and Arnstein Sletmoe, currently responsible for Mergers & amp; Acquisitions, the financial and economic director will be appointed. Hydro's chairman, Svein Richard Brandtzæg, will be chairman of the new company's board of directors. Sapa's headquarters will be in Oslo, Norway.
"Together, we create a stronger company, with a broader range of skills and a team of highly experienced managers. With the numerous challenges of the current market, the new company will be better prepared for restructuring and wealth generation, consolidating Orkla's ability to exploit the wealth-generating potential of its aluminum business, "comments Orkla Chairman of the Board, Åge Korsvold.
"The new company will have the necessary strength to face the challenges of today's markets, and will create a platform to continue growth in rising markets," says Hydro President Svein Richard Brandtzæg. "This transaction will contribute to the consolidation of Hydro as a world leader aluminum company, rich in resources and with a strong position in the entire production chain. With the merger with Sapa, Hydro will establish a new structure for its products business extruded products, which will be better positioned in terms of profitability and greater potential for continued growth, "says Brandtzæg.
As part of the agreement, the new company will benefit from the contribution of the relevant business areas of Hydro (through Hydro Aluminum AS) and Orkla (through Sapa Holding AB) in exchange for a 50% stake for each company. To offset the difference in business size and harmonize certain balance sheet items, Orkla, in addition to its 50% stake, will receive 1.8 billion Norwegian crowns from the new company. The amount must be paid within six months of completing the transaction.
Substantial improvement measures are underway at both companies and these, together with the estimated annual synergistic effects of NOK 1 billion, will contribute to further strengthening the new company. Globally, demand for extruded products is expected to continue to grow significantly.
"Aluminum is the material of the future. To satisfy customers' requirements and expectations, we need to continue to be leaders in research and development, accurately supply and optimize our global presence. Both companies demonstrate that they are able to increase the quality and efficiency and, together, we are determined to make the best of each of the companies, when they become one ", says Svein Tore Holsether, president of Sapa.
The agreement contains provisions that allow the parties to start a registration process on the stock exchange, approximately three years after the conclusion of the transaction and that both parties may decide to keep 34 percent of the shares.
The new company will be configured as an associated company in relation to the equity method.
*) Illustrative data for the new company, 2011, unaudited.