- Hydro has entered into an agreement to merge the majority of Vale's bauxite, alumina and aluminum assets with Hydro's existing business.
- The transaction turns Hydro into a fully integrated global aluminum company and will secure bauxite supplies for the company over the next hundred years.
- Vale will receive compensation consisting of a $ 1.1 billion cash payment and new Hydro shares representing 22 percent of the outstanding shares.
- As of April 30, taking into account the assumed net debt, this amounts to total compensation of $ 4.9 billion.
- After the transaction, Hydro will have more bauxite and alumina than the company needs for its own production. Besides electricity, aluminum oxide is the most important application factor for aluminum production.
- In order to partially fund the transaction, maintain the company's investment grade rating and capacity to implement future projects, Hydro intends to issue a fully guaranteed rights issue of NOK 10 billion (approximately $ 1.75 billion).
The transaction will give Hydro significant assets in Brazil, including full control and stake in Paragominas, one of the largest bauxite mines in the world, 91 percent of the world's largest alumina refinery, Alunorte, 51 percent of Albras smelter and 81 Percent in the CAP alumina refinery project
The merger will significantly strengthen Hydro's position in bauxite and alumina, which alongside energy are the key drivers in aluminum manufacturing. The very efficient cost structure of the activities to be undertaken will help to significantly strengthen Hydro's financial position.
At the time the transaction was completed, Hydro acquired 60 percent of Vale in Paragominas, 57 percent in Alunorte, 51 percent in Albras and 61 percent of the CAP project. In return, Vale will receive a cash payment of $ 1.1 billion and 22 percent of Hydro's outstanding share capital at that time. Hydro also assumes $ 0.7 billion in net debt from the activities to be acquired as of December 31, 2009. Before the takeover, Hydro already owned 34 percent of the shares in Alunorte and 20 percent of the shares in the CAP project.
Hydro has the right to purchase the remaining 40 percent stake in the Paragominas bauxite mine in two installments, for $ 0.2 billion each in 2013 and 2015, respectively. A total of approximately 3,600 Vale employees will then belong to Hydro as a result of the transaction. They represent a significant addition to the competencies, know-how and skills in the bauxite, aluminum oxide and aluminum business.
Vale, the world's second largest metal and mining group, receives 22 percent of Hydro's shares in return. This will expand the cooperation between the two companies, which has existed for almost 40 years and includes the current joint venture in the Alunorte alumina refinery, the MRN bauxite mine and the CAP project.
The transaction also includes additional bauxite licenses, an agreement to buy bauxite from Vale's 40 percent stake in the MRN bauxite mine, in which Hydro has a five percent stake, and a portfolio of aluminum oxide sales contracts.
The transaction with Vale is expected to close in the fourth quarter of 2010. The rights issue and private placement to Vale are subject to approval by Hydro's general meeting. The transaction with Vale also requires approval from Vale's joint venture partners and regulatory approvals. Hydro considers the risk associated with regulatory approvals to be limited.
Contractually, Vale cannot increase its stake in Hydro to more than 22 percent acquired through the transaction. The company must retain its stake in Hydro at least two years after the transaction is completed and cannot sell more than ten percent of the shares issued to a single buyer or group in the following two years. .
Vale will receive a representative on Hydro's Board of Directors, which must be approved by Hydro's executive bodies before the transaction is completed.
Hydro has hedged the price of the majority of the aluminum from the activities taken over by the end of 2011; it applies to 670,000 tonnes with an expected average price of around 2.400 USD per tonne for the entire period.
"This agreement will take Hydro into a new league in the global aluminum industry." The business secures Hydro's entitlement to bauxite and alumina rights for decades and strongly improves our competitive position, we become financially more resilient and our starting point for further growth is strengthened, ”explains CEO Svein Richard Brandtzæg. “Vale is known for its strong social and environmental commitment. Hydro will build on these high standards, ”adds Brandtzæg.
The projects in Hydro's portfolio include the construction of the CAP alumina refinery, the expansion of the Paragominas bauxite mine in Brazil and a possible second construction phase for the Qatalum aluminum smelter in Qatar. In Norway, Hydro will continue the development of the Holsbru hydropower project and the planning of a new recycling center in the Karmøy smelter.
Issue of subscription rights
Hydro’s largest owner, the Norwegian state, represented by the Ministry of Trade and Economy, currently holds 43.8 percent of Hydro’s shares and endorses the transaction and rights issue. The Ministry of Trade and Economy will bring a government bill to parliament to exercise its pro-rata stake in the rights issue, which is expected to be adopted in mid-June 2010. The Government Pension Fund Norway (Folketrygdfondet), which holds 5.9 percent of Hydro's shares, is also in favor of the transaction and issue and has reached an agreement to guarantee its proportionate takeover of the shares in the rights issue ..
Citi, DnB NOR Markets and BNP Paribas guarantee the acquisition of the remaining shares in the subscription rights issue in accordance with the conventional terms and conditions.
Hydro will convene an extraordinary general meeting, which is expected to take place in late June 2010, shortly after the expected treatment of the rights issue in the Norwegian parliament. The issue price of the rights issue is set shortly before the extraordinary general meeting. The subscription period will begin shortly after the extraordinary general meeting, the subscription rights issue is scheduled to be completed in July 2010
If the transaction is carried out after the rights issue, a private placement on Vale of 22 percent of the outstanding shares will result in the Norwegian state's share being reduced from 43.8 percent today to around 34.5 percent.
Description of the activities to be undertaken
Paragominas is the world's third largest bauxite mine with an annual capacity of 9.9 million tons. A planned expansion to supply the CAP refinery will increase Paragominas' capacity to 15 million tons.
Alunorte is the world's largest alumina refinery with some of the best refurbishment costs and an annual capacity of 6.3 million tons. Hydro already holds 34 percent of the shares in Alunorte and will increase its stake to 91 percent through the transaction.
Albras is a hydropowered aluminum smelter that is in the second quartile of the industrial cost scale and has an annual capacity of 455,000 tons. & nbsp; Hydro will own 51 percent of Albras as a result of the transaction.
The CAP project involves the construction of a new alumina refinery with an initial annual capacity of 1.86 million tons. The potential for expansion of the project amounts to 7.44 million tons per year, the bauxite supply should mainly come from Paragominas. Hydro already holds 20 percent of the shares in CAP and will increase their stake to 81 percent through the transaction.
All assets to be acquired are located in Brazil.
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- Early June & nbsp; Publication of an information memorandum
- End of June Extraordinary General Meeting of Hydro
- End of June & publication of the share prospectus
- July & nbsp; end of subscription rights issue
- End of 2010 & nbsp; completion of the transaction
- 03. May at 4:00 p.m. CET conference call for the international financial market. You can find details on & nbsp; participation at www.hydro.com
Financial and legal advisors
In connection with the transaction, Citi provides financial advice, while law firms Thommessen AS and Latham & amp; Watkins LLP are engaged as legal advisors.
In conjunction with the rights issue, Citi, DnB NOR Markets and BNP Paribas will act as global coordinators, while Thommesen AS and & nbsp; Latham & amp; Watkins LLP are the legal advisors.