Skip to content

      Insights

      Hydro acquires Sapa to create a global aluminium champion

      Norsk Hydro has agreed with Orkla to acquire its 50 percent interest in Sapa for a total enterprise value of NOK 27 billion, giving full ownership in the global leader in extruded aluminium solutions and making Hydro a leading force in the global aluminium industry.

      Transactional highlights

      • Binding agreement to acquire Orkla’s 50% interest in Sapa
      • Sapa enterprise value NOK 27 billion
      • Accretive to earnings and strong cash generation from Sapa from day 1
      • Synergies of NOK 200 million per year, mainly related to remelt and recycling
      • Sapa to become new business area in Hydro, named Extruded Solutions
      • Anticipated closing of the transaction in second half 2017

      Strong strategic rationale

      • Global leadership: worldwide production and customer offering, with unparalleled technological capability
      • Growth: capability and freedom to grow in the most attractive areas of global aluminium 
      • Infinite solutions: responsible operations and sustainable solutions for the future low-carbon economy

      “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.”

      The combination will make Hydro the only global company in the aluminium industry that is fully integrated across the value chain and markets. Hydro will have unparalleled strength in technology, R&D, innovation and product development, as well as an unmatched product and service offering to the benefit of more than 30,000 customers throughout the world.

      After Hydro and Orkla combined their aluminium extrusion assets in 2013, the two companies have consistently supported the Sapa joint venture’s impressive progress towards higher performance and value creation through streamlining and improving its global operations.

      Global reach, local presence
      Following the transaction, Hydro will become a global, integrated aluminium company with more than 35,000 employees, and activities in around 40 countries. Hydro’ rolled products business has a strong market presence throughout product segments in Europe. Sapa is the global extrusion champion, with strong market shares in North America and Europe, and is the global leader in precision tubing.

      Hydro also has solid market presence in metal products across the value-added metal product categories in Europe, North-America and Asia, and is Norway’s second-largest producer of renewable hydropower. With long positions in bauxite and alumina, Hydro is among the global leaders in the third-party bauxite and alumina market outside China.

      “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.

      Transaction
      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. Following the transaction, Hydro is committed to retain its investment grade rating and a robust balance sheet. Hydro will maintain its dividend policy of returning 40 percent of net income over the cycle, with NOK 1.25 per share seen as a floor in 2017.

      The purchase price will be paid in cash at completion, adjusted for net debt and normalized working capital.

      Completion of the transaction is subject to approval from relevant competition authorities, and is expected in the second half of 2017.

      Description of acquired assets
      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. Sapa operates within the business areas Extrusion Europe, Extrusion North America, Precision Tubing and Building Systems, has 22,400 employees and is present in 40 countries.

      Key financial figures for Sapa (100 % basis) (unaudited)
      In NOK million, except sales volumes

        Q1 2017 Q1 2016 Year 2016 Year 2015 Year 2014
      Sales volume (1000 mt) 355 349 1 365 1 363 1 399
      Total Revenues 14 337 13 919 53 430 55 397 46 377
      Reported EBIT 856 655 2 420 528 -317
      Reported net income (loss) 625 418 1 779 246 -626
                 
      Underlying EBITDA 1 100 901 3 498 2 729 1 916
      Underlying EBIT 778 571 2 197 1 407 652
      Underlying net income (loss) 562 365 1 553 907 398
                 
      Total assets 28 628 28 204 25 939 28 870 27 629
      Total equity 14 567 12 828 13 800 12 871 11 538
      Total liabilities 14 060 15 376 12 139 15 999 16 091

      Sapa Board of Directors and management team

      At the date of this announcement, Sapa's Board of Directors consists of six persons. The Board of Directors is presented in the table below. After the completion of the transaction, Hydro will own 100% of Sapa and will as a consequence change the board composition of the company. 

      Peter A. Ruzicka - Chairman of the Board
      Eivind Kallevik - Board member
      Anne-Lene Midsheim - Board member
      Terje Andersen - Board member
      Kenneth Hertz - Board member
      Tor Egil Skulstad - Board member

      At the date of this announcement, Sapa’s management team consists of 10 individuals.

      Egil Hogna - President & CEO
      Karl Eichinger - EVP & CFO
      Katarina Nilsson - EVP HR & Organization
      Florian Krumbacher - EVP & General Counsel
      Rafael Fuertes - EVP Strategy & Innovation
      Erika Ahlqvist - EVP Communication & CSR
      Charlie Straface - EVP & Business Area President - Extrusion North America
      Sergio Vendrasco - EVP & Business Area President - Precision Tubing
      John Thuestad - EVP & Business Area President - Extrusion Europe
      Salvador Biosca - EVP & Business Area President - Building Systems

      There are customary retention agreements in place for Sapa's management team. The total cost of the retention arrangements is estimated to approximately NOK 20 million. Orkla and Hydro have agreed to share the retention costs.

      Indicative timeline
      Signing of share purchase agreement (SPA): July 10, 2017
      Publication of Information Memorandum: Within 30 working days after signing of SPA
      Competition approvals required for closing: Brazil, Canada, China, EU, Turkey
      Close of transaction: Expected in second half 2017
      Financing activities: Second half 2017/2018  

      Press conference, analyst and investor presentation and conference call
      July 10, 09:00 CET: Press conference and analyst and investor presentation with webcast (in English) at Hydro’s Oslo headquarters. Link to webcast will be made available on www.hydro.com.

      July 10, 15:00 CET: Telephone conference for the international financial market. Phone-in details will be made available on www.hydro.com.

      Financial and legal advisors

      Morgan Stanley has provided Hydro’s Board of Directors with a fairness opinion for the transaction, while Wikborg Rein acted as Hydro’s primary legal advisor.