Hydro’s huge deal cuts state’s stake

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Industrial concern Norsk Hydro announced the biggest foreign acquisition in Norwegian history on Sunday, saying it had agreed to buy the Brazilian mining company Vale SA for nearly NOK 30 billion. The deal will cut the Norwegian government’s stake in Hydro.

Hydro CEO Svein Richard Brandtzæg (center), signing the deal with Vale in Oslo Sunday morning. PHOTO: Hydro.com

The state has long been a major owner in Hydro, but now will see its stake cut from nearly 44 percent to about 34.5 percent, reports dn.no. Trond Giske, the government minister for business and trade, said the state would still have “negative control” over Hydro and praised the deal as being important for the venerable Norwegian firm.

“Vale and Hydro have a long history together,” Giske said in a statement Sunday afternoon, noting that Hydro will buy Vale’s aluminum operations and Vale will become a shareholder in Hydro. Hydro will secure new access to raw metals and “strengthen its stategic position.”

Giske said the state aims to bring its stake in Hydro back up to 40 percent over time. “It’s important for the state to remain a large and long-term owner in Hydro,” he said.

Hydro has shrunk considerably in recent years, after spinning off its fertilizer business and, more recently, its oil and gas interests. It’s mostly a metals concern now, and the acquisition of Vale will make it one of the world’s leading aluminum companies.

“This is an historic day for Hydro,” said chief executive Svein Richard Brandtzæg. He said Hydro will go from being in a difficult raw metals situation to a situation where it will have plentiful bauxite and aluminum.

Vale is the world’s next-largest mining company. Its acquisition also will give Hydro control over Paragominas in Brazil, one of the world’s largest bauxite mines, plus the world’s largest aluminum refinery.

Brandtzæg said the deal puts Hydro “in a new league” in the global aluminum industry, and will position Hydro well for new growth. Hydro last week reported improved first-quarter earnings linked to higher aluminum prices and rising demand.

Hydro will issue new stock to help finance the Vale deal, which is what will cut the state’s stake. Giske wasn’t concerned, saying the state won’t hinder “large, reasonable restructurings.”

All of Vale’s assets are in Brazil and its roughly 3,600 employees will become Hydro employees.

Views and News from Norway/Nina Berglund
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