Hydro takes over Vale's aluminium business in transforming transaction
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(Oslo, May 2, 2010) Norsk Hydro ASA has signed an agreement to take over Vale
S.A's aluminium businesses to form a resource-rich and fully integrated
aluminium company, securing Hydro's bauxite supplies in a 100-year perspective.
Summary
* Hydro has entered into an agreement to combine the majority of Vale's
bauxite, alumina and aluminium assets with Hydro's existing business
* The transaction transforms Hydro into a fully integrated global aluminium
company securing the company's bauxite supplies in 100-year perspective
* Vale will receive a total consideration comprising USD 1.1 billion in cash
and new Hydro shares equivalent to 22 percent ownership of its outstanding
shares.
* As of April 30 and considering assumed net debt, this equates to a total
consideration of USD 4.9 billion
* Following the transaction, Hydro will have a long position in bauxite and
alumina, the key input factors for aluminium production in addition to
energy
* To partly finance the transaction, support the company's investment grade
rating and capacity to implement future projects, Hydro intends to launch a
fully underwritten rights issue of NOK 10 billion (approximately USD 1.75
billion).
The transaction
The transaction will provide Hydro with high-quality assets in Brazil,
comprising full control and ownership of Paragominas, one of the largest bauxite
mines in the world, 91 percent ownership in the world's largest alumina refinery
Alunorte, 51 percent ownership in the Albras aluminium plant and 81 percent
ownership in the CAP alumina refinery project.
The combination will considerably strengthen Hydro's position in bauxite mining
and alumina refining, which, along with energy, are the most important input
factors in aluminium production. The high quality and efficient cost base of the
contributed assets will also significantly improve Hydro's financial position.
Vale will at closing of the transaction contribute 60 percent in Paragominas,
57 percent in Alunorte, 51 percent in Albras and 61 percent in the CAP alumina
refinery project in return for a consideration comprising USD 1.1 billion of
cash and 22 percent of Hydro's outstanding share capital at that time. Hydro
will also assume USD 0.7 billion of net debt within the contributed businesses
as of December 31, 2009. Prior to the combination, Hydro already has 34 percent
ownership in Alunorte and 20 percent ownership in CAP.
Hydro has the right 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. In total, around 3,600 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.
Vale, the world's second-largest metals and mining company, will receive 22
percent ownership in Hydro as part of the combination, extending the close to
40 years partnership between the two companies from their current joint
ownership in the Alunorte alumina refinery, the MRN bauxite mine and the CAP
alumina refinery project.
The transaction also comprises additional bauxite licenses, a volume off-take
agreement for Vale's 40 percent stake in the MRN bauxite mine, in which Hydro
holds 5 percent ownership, and an alumina sales contract portfolio.
The rights issue and the private placement towards Vale are subject to approval
by Hydro's general meeting of shareholders. The transaction with Vale also needs
the consent of joint-venture partners in Vale assets, as well as regulatory
approvals. Hydro considers the regulatory risks attached to the combination to
be limited.
The closing of the transaction with Vale is expected in fourth quarter 2010.
According to the agreement, Vale cannot increase its ownership in Hydro beyond
the 22 percent contributed as part of the transaction, will 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.
Vale will have one representative on Hydro's Board of Directors, subject to
approval by Hydro's governing bodies prior to closing of the transaction.
Hydro has hedged the majority of the net aluminium price exposure in the
contributed assets until the end of 2011, amounting to 670,000 tonnes with an
expected average price of about USD 2,400 per tonne for the entire period.
"This transforming and value-creating combination takes Hydro to a new league in
the global aluminium industry. The deal will secure Hydro equity bauxite and
alumina ownership and significantly improve our competitive position, making us
more financially robust and well-positioned for growth," said Hydro's President
and CEO Svein Richard Brandtzæg. "Vale is highly recognized for its strong
social and environmental track record and its commitment to transform mineral
resources into sustainable development. Hydro will continue to build on these
high standards," Brandtzæg added.
Projects in Hydro's growth pipeline include the construction of the CAP alumina
refinery and the expansion of the Paragominas bauxite mine in Brazil and a
possible second phase of the Qatalum aluminium plant in Qatar. In Norway, Hydro
will continue to develop the Holsbru hydropower project and the plan for a new
recycling plant at Karmøy.
Rights Issue
Hydro's largest shareholder, the Norwegian state, represented by the Ministry of
Trade and Industry, owns 43.8 percent of the issued shares and is supportive of
the transaction and the rights issue. The Ministry of Trade and Industry will
put forward a parliamentary proposition to participate for its pro rata share of
the rights issue, which is expected to be obtained by mid-June 2010. The
Government Pension Fund Norway (Folketrygdfondet), owner of 5.9 percent of the
issued shares, is supportive of the combination and the rights issue, and has
entered into an agreement to underwrite and subscribe for its pro rata share of
the rights issue.
The remaining share of the rights issue is underwritten by Citi, DnB NOR Markets
and BNP Paribas, subject to customary terms and conditions.
Hydro will call for an extraordinary general meeting, which is expected to be
held towards the end of June 2010, shortly after the expected parliamentary
approval of the rights issue. The subscription price in the rights issue will be
set shortly before the extraordinary general meeting. The subscription period
will commence shortly following the extraordinary general meeting, with the
rights issue targeted for completion in July 2010.
At closing of the combination and following the rights issue, a private
placement to Vale of 22 percent of Hydro's outstanding shares will result in the
Norwegian state's ownership in the company being reduced from 43.8 percent to
approximately 34.5 percent.
Description of contributed assets
Paragominas is the world's third-largest bauxite mine with a current annual
capacity of 9.9 million tonnes. A planed expansion to supply the CAP refinery
will increase Paragominas' capacity to 15 million tonnes.
Alunorte is the world's largest alumina refinery, with a first-decile conversion
cost profile and an annual capacity of 6.3 million tonnes. Hydro already owns
34 percent of Alunorte, and will increase its stake to 91 percent following the
transaction.
Albras is a hydro-powered aluminium plant operating in the second quartile of
the industry cash cost curve, with an annual capacity of 455,000 tonnes. Hydro
will own 51 percent of Albras as a result of the transaction.
The CAP project is an alumina refinery under development, with an initial annual
capacity of 1.86 million tonnes. The project has an expansion potential up to
7.44 million tonnes per year, with bauxite supply primarily from Paragominas.
Hydro already owns 20 percent of CAP, and will increase its ownership to 81
percent following the transaction.
All of the assets to be contributed are located in Brazil
USD million 2007 2008 2009
--------------------------------------------------------------------------------
Revenues 2 389 2 662 1 871
--------------------------------------------------------------------------------
EBITDA 887 734 22
--------------------------------------------------------------------------------
Depreciation -103 -149 -202
--------------------------------------------------------------------------------
EBIT 784 585 -179
--------------------------------------------------------------------------------
Income (loss) before
taxes 967 343 141
--------------------------------------------------------------------------------
Net income 751 283 107
--------------------------------------------------------------------------------
Net income attributable
to minority shareholders 328 97 86
--------------------------------------------------------------------------------
Net income attributable
to Hydro shareholders 423 186 21
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
USD million December 31, 2007 December 31, 2008 December 31, 2009
--------------------------------------------------------------------------------
Total assets 5 376 4 854 6 172
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Total liabilities 1 427 1 465 1 608
--------------------------------------------------------------------------------
Non-controlling interests 1 738 1 470 2 012
--------------------------------------------------------------------------------
Majority equity 2 212 1 918 2 552
--------------------------------------------------------------------------------
Total equity 3 949 3 388 4 564
--------------------------------------------------------------------------------
The financial information for the assumed interests has been derived from Vale's
audited consolidated financial statements, which has been prepared in conformity
with US GAAP. The information represents carve-out combined financial
information for the historical operations, assets and liabilities covered by the
transaction, prepared by Vale management. The condensed combined financial
information is not audited.
Expected timeline
Timing Event
Early June Publication of information memorandum
Late June Extraordinary general meeting in Hydro
Late June Publication of prospectus
July Rights issue completed
End-2010 Transaction closing
Press conference, analysts and investor presentation, conference call
* May 2, 1700 CET: Press conference with webcast (in Norwegian) at Hydro's
Oslo headquarters
* May 3, 0900 CET: Analyst and investor presentation with webcast (in English)
at Hydro's Oslo headquarters
* May 3, 1600 CET: Telephone conference for the international financial
market. Phone-in details will be made available on www.hydro.com
Financial and legal advisors
In connection with the transaction, Citi is serving as Hydro's financial advisor
while law firms Thommessen AS and Latham & Watkins LLP are serving as legal
advisors.
In connection with the rights issue, Citi, DnB NOR Markets and BNP Paribas will
act as joint global coordinators and joint bookrunners to Hydro, while
Thommessen AS and Latham & Watkins LLP will serve as legal advisors.
Press contacts
* Contact: Halvor Molland
Cellular: +47 92979797
E-mail: Halvor.Molland(at)hydro.com
* Contact: Erik Brynhildsbakken
Cellular: +47 41751271
E-mail:erik.brynhildsbakken(at)hydro.com
Investor contact
* Contact: Stefan Solberg
Cellular: +47 91727528
E-mail: Stefan.Solberg(at)hydro.com
*********
Cautionary note
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.
This announcement is not an offer for sale of securities in the United States or
any other country. The securities referred to herein have not been registered
under the U.S. Securities Act of 1933, as amended (the "U.S. Securities Act"),
and may not be sold in the United States absent registration or pursuant to an
exemption from registration under the U.S. Securities Act. Hydro does not intend
to register any portion of the offering of the securities in the United States
or to conduct a public offering of the securities in the United States. Any
offering of securities will be made by means of a prospectus that may be
obtained from Hydro and that will contain detailed information about the company
and management, as well as financial statements. Copies of this announcement are
not being made and may not be distributed or sent into the United States,
Canada, Australia, Japan or any other jurisdiction in which such distribution
would be unlawful or would require registration or other measures.
In any EEA Member State that has implemented Directive 2003/71/EC (together with
any applicable implementing measures in any member State, the "Prospectus
Directive"), this communication is only addressed to and is only directed at
qualified investors in that Member State within the meaning of the Prospectus
Directive.
This announcement is only directed at (a) persons who are outside the United
Kingdom; or (b) investment professionals within the meaning of Article 19 of the
Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the
"Order"); or (c) persons falling within Article 49(2)(a) to (d) of the Order; or
(d) persons to whom any invitation or inducement to engage in investment
activity can be communicated in circumstances where Section 21(1) of the
Financial Services and Markets Act 2000 does not apply.
This information is subject of the disclosure requirements acc. to §5-12 vphl
(Norwegian Securities Trading Act)
[HUG#1410924]
Presentation: http://hugin.info/106/R/1410924/363269.pdf
Unternehmensinformation / Kurzprofil:
Datum: 02.05.2010 - 16:20 Uhr
Sprache: Deutsch
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"Hydro takes over Vale's aluminium business in transforming transaction"
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