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Hydro acquires Sapa to create a global champion in the aluminum sector

Norsk Hydro struck a deal with Orkla to acquire its 50 percent stake in Sapa, for the company's total value of NOK 27 billion, taking the lead in the global leader in extruded aluminum solutions and making Hydro a force unique in the global aluminum sector.

Transaction highlights

  • Partnership agreement to acquire 50% of Orkla's shares in Sapa
  • Value of Sapa as a company: NOK 27 billion
  • Increased profit generation and strong cash generation from Sapa from day 1
  • NOK 200 million synergies per year, mainly related to refounding and recycling
  • Sapa becomes a new business area for Hydro, called Extruded Solutions
  • Expected closing of the transaction in the second half of 2017

Strong strategic philosophy

  • Global leadership: production and supply to customers worldwide with unmatched technological resources
  • Growth: resources and freedom to grow in the most promising areas regarding global aluminum
  • Infinite solutions: responsible operations and sustainable solutions for the future low-carbon economy

“Hydro now confirms its position as the world's leading integrated aluminum company. This transaction reinforces our strategic direction of being Better, Bigger and Greener, with a solid asset base, exclusive skills and resources ranging from mining to products for end users ”, said Hydro President and CEO, Svein Richard Brandtzæg. “Sapa will allow us to take the global lead, establish a platform for growth and provide responsible operations and sustainable solutions for the future low-carbon economy.”

This combination will make Hydro the only global company in the aluminum sector fully integrated in the value chain and markets. Hydro will have unmatched strength in the fields of technology, R & D, innovation and product development, as well as an unmatched portfolio in products and services, benefiting more than 30,000 customers worldwide.

After Hydro and Orkla combined their aluminum extrusion assets in 2013, the two companies continuously supported the important progress of the Sapa joint venture towards increasing performance and creating value, rationalizing and improving their operations global.

Global reach, local presence

After the transaction, Hydro will become a global and integrated aluminum company with more than 35,000 employees and activities in approximately 40 countries. Hydro's laminated products business has a strong market presence in all product segments in Europe. Sapa is the global champion in extrusion, with strong market shares in North America and Europe, and a global leader in precision piping.

Hydro also has a strong market presence in all categories of value-added metallic products in Europe, North America and Asia, and is the second largest producer of renewable hydroelectric energy in Norway. Hydro has a prominent position in bauxite and alumina, and is among the global leaders in the outsourcing market outside of China.

“Sapa has successfully restructured its business and increased profitability, and is now well positioned to continue its trajectory as part of Hydro, aiming to generate even higher value by focusing on high-tech and highly competent market segments”, said Brandtzæg.

Transaction
The transaction will be financed through cash positions and bond issuance in the Norwegian and international markets, obtaining temporary financing through committed credit lines and not used. After the transaction, Hydro is committed to maintaining the speed of its investment operations and strong balance sheet. Hydro will maintain its dividend policy, which is related to returning 40 percent of net revenue during the period, with shares on the basis of NOK 1.25 per share in 2017.

The purchase price will be paid in cash at the time of closing, adjusted for net debt and normalized working capital.

The conclusion of the transaction is subject to the approval of the competition authorities, and is scheduled for the second half of 2017.

Description of assets acquired
Sapa, formed as a 50/50 joint venture between Orkla and Hydro in 2013, is a very successful supplier successful aluminum solutions and the world's largest extrusion company. Sapa operates in the areas of Extrusion Europe, Extrusion North America, Precision Piping and Construction Systems, has 22,400 employees and is present in 40 countries.

Sapa's board of directors and management team
As of the date of this announcement, Sapa's Board of Directors was composed of six people. The Board of Directors is shown in the table below. After the conclusion of the transaction, Hydro will be 100% owner of Sapa and, consequently, will change the composition of the company's Board.

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

On the date of this announcement, Sapa's management staff was composed of ten people. The executive staff is shown in the table below.

Name Position
Egil Hogna President and CEO
Karl Eichinger Executive Vice President and CFO
Katarina Nilsson Vice President HR and Organization Executive
Florian Krumbacher Executive Vice President and General Counsel
Rafael Fuertes Executive Vice President, Strategy and Innovation
Erika Ahlqvist Executive Vice President, Communication Strategy and Innovation and CSR
Charlie Straface Executive Vice President of Strategy and Innovation and President of the North American Extrusion Unit
Sergio Vendrasco Executive Vice President and President of the Precision Piping Unit
John Thuestad Vice- executive president and President of the Europe Extrusion Unit
Salvador Biosca Executive vice president and President of the Construction Systems Unit

For Sapa's board, there are usual retention agreements. The total cost of retention agreements is estimated at approximately NOK 20 million. Orkla and Hydro reached an agreement to share the retention costs.

Approximate term

Signature of the purchase contract (SPA): July 10, 2017
Publication of the Minutes of Information: Within 30 working days after signing the SPA
Approvals from competition agencies required for the closing: Brazil, Canada, China, EU, Turkey
Closing of the transaction: Expected for the second half of 2017
Financing activities: Second half of 2017/2018

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