Orkla ASA and Norsk Hydro ASA have agreed to combine their respective profiles, building systems and tubing business, creating the world's leading aluminium solutions provider. The new combined company, to be named Sapa, will be a 50/50 joint venture owned by Orkla and Hydro.
The agreement covers Profiles and Building System, as well as Extruded and Welded tubes, of Orkla's fully-owned Sapa and all of Hydro's Extruded Products business area.
Based on 2011 figures, the combined company will have around NOK 47 billion in annual revenues, underlying EBITDA of around 1.9 billion and approximately 25,000 employees.* The new company will have leading positions in Europe and North America, and strong footholds in emerging markets, including Brazil, Argentina, China, India and Vietnam.
Completion of the transaction is expected to take place in the first half of 2013, following approvals from relevant competition authorities. Svein Tore Holsether, currently President and CEO of Sapa, will be President and CEO, and Arnstein Sletmoe, currently Head of Mergers & Acquisitions in Hydro, will be appointed CFO of the merged company. President and CEO of Hydro, Svein Richard Brandtzæg, will be the chairman of the company. Sapa will have its headquarter in Oslo, Norway.
"Together we are creating a stronger company with a broader competence base and a highly experienced management team. In today's very challenging market conditions, the combined company will be better positioned for restructuring and value creation. This will strengthen Orkla's ability to successfully capture the value potential of our aluminium business," says Orkla's President and CEO Åge Korsvold.
"The new company will have the necessary strength to meet current challenging markets and create a platform for future growth in emerging markets," says Hydro's President and CEO Svein Richard Brandtzæg. "This transaction will contribute to strengthening Hydro as a world-leading, resource-rich aluminium company with robust activities across the value chain. Through the combination with Sapa, Hydro is establishing a new structure for its extrusion business positioned for improved profitability and potential for future growth," he says.
As part of the agreement, Hydro (through Hydro Aluminium AS) and Orkla (through Sapa Holding AB) will contribute their relevant businesses to the new company in return for shares on a 50/50 basis. To compensate for the difference in size and to harmonize certain balance sheet items, Orkla will, in addition to its 50 percent ownership, receive the amount of NOK 1.8 billion from the new company. The amount is expected to be paid within 6 months of completion.
Significant improvement efforts are ongoing in both entities and will, together with assumed annual synergies of around NOK 1 billion, contribute to further strengthening the new company. On a global basis, demand for extruded aluminium applications is expected to continue its strong underlying growth.
"Aluminium is the material of the future. To meet customers' high demands, we need to continue to excel in R&D, deliver with precision and optimize our global footprint. Both entities have demonstrated their ability to increase quality and efficiency, and together we are determined to bring out the best of the two companies into one," says Svein Tore Holsether, President and CEO of Sapa.
The agreement contains provisions whereby either party may initiate an initial public offering (IPO) process after approximately three years from closing, and where each party can decide to retain 34 percent.
The new joint venture will be presented as an associated company according to the equity method.
*) Illustrative figures for the new company 2011, unaudited
Håkon Mageli, EVP Corporate Communications and Corporate Affairs
Tel: + 47 92 84 58 28
Rune Helland, SVP Investor Relations
Tel: +47 22 54 44 11 / +47 97 71 32 50
This announcement and its appendices (collectively, the "Announcement") has been prepared by Norsk Hydro ASA ("Hydro") and Orkla ASA ("Orkla") (jointly referred to as the "Companies") solely for the use at the announcement held in connection with the announcement of the combination of Hydro's aluminium extrusion and building systems business and Orkla's aluminium extrusion and building systems currently conducted through Sapa AB, in a 50/50 owned company (the "Joint Venture").
Statements in this announcement refer to the Joint Venture, but a combination of said businesses is pending inter alia regulatory approval and completion of the transactions set out in the agreement between the parties.
Certain statements included within this Announcement contain forward-looking information, including, without limitation, those relating to (a) forecasts, projections and estimates, (b) statements of Orkla's and Hydro's objectives and strategies for the Joint Venture (c) targeted production volumes, capacities or rates, start-up costs, cost reductions and profit objectives, (d) various expectations about future developments in relevant markets, supply and demand, (e) results of operations, , (f) growth rates, (h) risk management, as well as (h) statements preceded by "expected", "scheduled", "targeted", "planned", "proposed", "intended" or similar expressions.
Although the Companies 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 material risks and uncertainties. Various factors could cause actual results or other future positions to differ materially from those projected in a forward-looking statement or materially affect the extent to which a particular projection is realized. Factors that could cause these differences include, but are not limited to, changes in the availability and cost of energy and raw materials; global supply and demand for 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 key markets and competition; and legislative, regulatory and political factors.
No assurance can be given that such expectations will prove to have been correct. The Companies and the Joint Venture disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
This Announcement has not been reviewed or approved by any regulatory authority or stock exchange. This Announcement is not a prospectus and does not contain the same level of information as a prospectus.
The contents of this Announcement shall not be construed as an investment advice. By attending or receiving this Announcement and/or investing in the shares issued by any of the Companies, you acknowledge and accept that you will be solely responsible for your own assessment of the market and the market position of, and other factors of relevance to, the Companies and that you will conduct your own analysis and be solely responsible for forming your own view of the potential future performance of the respective Company's business and its shares.
This Announcement speaks as of October 15, 2012.