Norsk Hydro, Europe's third-largest steel producer, has agreed to buy key mining assets from Brazil's Vale in a deal worth $4.9 billion (approximately Ôé¼3.7 billion).
Under the terms of the agreement, Vale, the worldÔÇÖs largest producer of iron ore, will receive $1.1 billion (approximately Ôé¼834 million) in cash and a 22 per cent stake in Hydro in exchange for 60 per cent of Paragominas in Brazil, one of the world's largest bauxite plants, 57 per cent of alumina refinery Alunorte, 51 per cent of the Albras aluminium plant and 61 per cent of the CAP alumina refinery project.
The Norwegian firm also has the right to acquire the remaining 40 per cent stake in Paragominas via two instalments of $200 million (Ôé¼151 million), in 2013 and 2015. Vale, meanwhile, cannot increase its shareholding of Hydro to more than 22 per cent and must retain the shares for at least two years following the close of the deal, which is expected to be in the fourth quarter of this year.
NorwayÔÇÖs government is Hydro's biggest holder, with a 43.8 per cent stake in the company. The transaction will reduce its holding to around 34.5 per centÔÇöthough it is expected to raise its holding to around 40 per cent in the long-term. Vale will become HydroÔÇÖs second largest shareholder.
The deal will enable Hydro to depend less on mining companies like Rio Tinto for supplies of bauxite and alumina necessary for its production processes. The deal will secure Hydro's bauxite supplies for up to 100 years.
Commenting on the deal, HydroÔÇÖs president and CEO, Svein Richard Brandtz├ªg, said: ÔÇ£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.
ÔÇ£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.ÔÇØ
About 3,600 Vale employees will be transferred to Norsk, which already employs 19,000 people in 40 countries. Vale currently has more than 100,000 employees around the world.
Analysts have suggested that Vale may have sold the assets due to concerns that it may not be able to secure cheap energy for aluminium processing in the future.
Projects in Hydro's growth pipeline include the construction of the CAP alumina refinery and the expansion of Paragominas, as well as a possible second phase of the Qatalum aluminium plant in Qatar.
In Norway, Hydro will continue to develop the centrally-located Holsbru hydropower project and the plan for a new recycling plant at Karm├©y, in the south-west of the country.
