Hydro acquires Orkla's 50% interest in Sapa to form global aluminium conglomerate

Norsk Hydro have entered into an agreement with Orkla to purchase Orkla's 50% interest in Sapa for a value of NOK 27 billion. This will give Hydro the full ownership in the global leader in extruded aluminium solutions making Hydro a leading global integrated aluminium company with more than 35,000 employees, and activities in around 40 countries.

The acquisition is expected to increase earnings and cash generation from Sapa from the very first day and it would generate synergies of NOK 200 million per year, mainly related to remelt and recycling. Hydro has a strong strategic rationale behind the acquisition which would entitle a new business area for Hydro under Extruded Solutions. The transaction is expected to close in second half of 2017.

Hydro would gain global leadership through worldwide production and customer offering, supplemented by its unparalleled technological capability and strength in R&D, innovation and product development.

"Hydro is now confirming its position as the world's leading integrated aluminium company and the transaction reinforces our strategic direction Better, Bigger and Greener, with a solid asset base, unique competencies and capabilities from mining to end-user products," said Svein Richard Brandtzæg, President and CEO in Hydro. "Sapa will enable us to assume global leadership, establish a platform for growth, and provide responsible operations and sustainable solutions for the future low-carbon economy."

With long positions in bauxite and alumina, Hydro is a leader in the third-party bauxite and alumina market outside China. other than the primary segment, Hydro has solid market presence in aluminium products across the value-added metal product categories in Europe, North-America and Asia, benefitted by its position as Norway's second-largest producer of renewable hydropower.   Hydro's rolled products division too has a strong market presence throughout Europe. On the other hand, Sapa, as the global extrusion leader and a leader in precision tubing has strong market shares in North America and Europe. The integration will make Hydro the sole aluminium company that is fully integrated across the value chain and markets.

"Sapa has successfully restructured its business and lifted profitability and is now well-positioned to continue its journey as part of Hydro, aiming for even higher value creation through targeting high-tech, high-competence value-add market segments," Brandtzæg said.

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Formed as a 50/50 joint venture between Orkla and Hydro in 2013, Sapa is a highly successful aluminium solutions provider and the world's largest extrusion company. After the merging of Hydro and Orkla’s aluminium extrusion assets, the two companies have consistently supported the impressive growth of the joint venture towards higher performance and value creation. The current acquisition will consummate the business integration in the most productive way.

The transaction will be financed through cash positions and issuance of bonds in Norwegian and international markets, and will be temporarily funded by committed undrawn credit lines.