Hydro-Vale aluminium transaction to be completed today

Norsk Hydro ASA (Hydro) expects to complete the takeover of Vale S.A.’s (Vale) aluminium business today, February 28, 2011.

February 28, 2011

Hydro’s Board of Directors has on this basis resolved to issue approximately 448 million shares to Vale, through its wholly owned subsidiary Vale Austria Holdings GmbH, as partial consideration in the transforming transaction under which Hydro takes over Vale’s bauxite, alumina and aluminum operations in Brazil, as previously announced in May 2010.

The transaction provides Hydro with high-quality assets in Brazil, including full control and ownership of Paragominas, one of the largest bauxite mines in the world, 91 percent in the world’s largest alumina refinery Alunorte, 51 percent in the Albras aluminium plant and 81 percent in the CAP alumina refinery project. The transaction also includes additional bauxite licenses and a volume off-take agreement for Vale’s 40-percent stake in the MRN bauxite mine.

“This is a historic day for Hydro, marking the beginning of a new era as a fully integrated and truly global aluminium company. With this transforming transaction, Hydro will get the necessary resource base and strength to continue to take an active role in a promising and fast-growing aluminium industry,” says Hydro President and CEO Svein Richard Brandtzæg.

“Hydro is now well positioned in three strategically important and resource-rich regions of the world – Brazil, northern Europe and Qatar – each area with distinct strategic importance to Hydro’s future growth. I am particularly pleased to welcome on board a crew of 4,200 new colleagues, highly competent and well-equipped to ensure a steady course for Hydro going forward,” Brandtzæg says.

As part of the transaction, Vale contributes 60 percent in Paragominas, 57 percent in Alunorte, 51 percent in Albras and 61 percent in the CAP alumina refinery project. Prior to the combination, Hydro already had a 34 percent stake in Alunorte and 20 percent in CAP.

In total, around 4,200 Vale employees will become part of Hydro as a result of the transaction, representing significant addition of competence, expertise and skills within bauxite, alumina and aluminium operations. Executive Vice President Johnny Undeli will head Hydro’s new Bauxite & Alumina business, headquartered in Rio de Janeiro, Brazil.

The transaction is valued at approximately USD 5.27 billion at closing. The consideration comprises 22 percent of Hydro’s outstanding share capital valued at approximately USD 3.53 billion according to Hydro’s closing share price of NOK 44.63 and NOK/USD exchange rate of 5.66 per February 25, 2011, approximately USD 1.08 billion in cash payment to Vale and assumption of approximately USD 0.66 billion of net debt within the contributed businesses as of end-January 2011.

In addition, Hydro has an obligation to take over the remaining 40 percent stake in Paragominas in two installments, in 2013 and 2015, respectively, against a cash payment of USD 0.2 billion for each installment.

Hydro will consolidate the assumed Vale operations in its financial statements starting March 2011 and the results generated by these businesses as of this month will be included in Hydro’s first-quarter results. A new reporting segment will be established, Bauxite & Alumina, which will include the bauxite and alumina-related operations. The Albras aluminium plant will be included in Hydro’s Primary Metal reporting segment.

As partial consideration, 447,834,465 shares will be issued to Vale with a nominal value of NOK 1.098 each. Following the completion of the transaction the new share capital of Hydro will be NOK 2,271,760,107.048, divided into 2,068,998,276 shares, each with a nominal value of NOK 1.098. Hydro holds 33,387,070 own shares and the number of outstanding shares will consequently be 2,035,611,206.

The two largest shareholders in Hydro will be the Norwegian State, represented by the Ministry of Trade and Industry, and Vale with an ownership of 34.3 percent and 21.6 percent, respectively, of the shares issued, and correspondingly 34.8 percent and 22.0 percent of the shares outstanding.

According to the standstill and lock-up agreement entered into between Hydro and Vale, Vale has agreed not to increase its ownership in Hydro beyond 22 percent, to retain its shares in Hydro for at least two years after the transaction closes and following the two-year period not sell shares constituting more than 10 percent of Hydro’s issued shares to any single buyer or group.

According to the agreement, Vale is entitled to have one representative on Hydro’s Board of Directors. Mr. Tito Martins, Executive Officer and Head of Base Metals Operations in Vale, has been elected as a board member by Hydro’s Corporate Assembly, and will join Hydro’s board as its tenth member immediately following closing of the transaction.

Certain statements included within this announcement contain forward-looking information, including, without limitation, those relating to (a) forecasts, projections and estimates, (b) statements of management’s plans, objectives and strategies for Hydro, such as planned expansions, investments or other projects, (c) targeted production volumes and costs, capacities or rates, start-up costs, cost reductions and profit objectives, (d) various expectations about future developments in Hydro’s markets, particularly prices, supply and demand and competition, (e) results of operations, (f) margins, (g) growth rates, (h) risk management, as well as (i) statements preceded by “expected”, “scheduled”, “targeted”, “planned”, “proposed”, “intended” or similar statements.

Although we believe that the expectations reflected in such forward-looking statements are reasonable, these forward-looking statements are based on a number of assumptions and forecasts that, by their nature, involve risk and uncertainty.  Various factors could cause our actual results to differ materially from those projected in a forward-looking statement or affect the extent to which a particular projection is realized.  Factors that could cause these differences include, but are not limited to: our continued ability to reposition and restructure our upstream and downstream aluminium business; changes in availability and cost of energy and raw materials; global supply and demand for aluminium and aluminium products; world economic growth, including rates of inflation and industrial production; changes in the relative value of currencies and the value of commodity contracts; trends in Hydro’s key markets and competition; and legislative, regulatory and political factors.

No assurance can be given that such expectations will prove to have been correct.  Hydro disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Updated: October 11, 2016