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Thursday, June 20, 2024

Orkla sells Elkem for billions in cash

UPDATED: Norwegian industrial concern Orkla notified the Oslo Stock Exchange early Tuesday that it now has signed a deal to sell its Elkem metals unit to China National Bluestar Group Co Ltd (Bluestar). The deal will yield USD 2 billion (about NOK 12.5 billion) in cash for Orkla.

Elkem Salten is one of the silicon plants in the Elkem group that exports worldwide. PHOTO: Elkem

The deal also marks the first sign of agreement between China and Norway since the Chinese government erupted in anger over the Norwegian Nobel Committee’s decision to award the Nobel Peace Prize to a Chinese dissident. Since Bluestar is controlled by the Chinese government, its deal with Orkla may signal that pragmatic business interests can transcend political rhetoric.

Orkla had confirmed on Monday that it was in negotiations to sell Elkem’s silicon-related operations to Bluestar, after newspaper Dagens Næringsliv (DN) had written about them on its front page. The sale includes Elkem Silicon Materials, Elkem Foundry Products, Elkem Carbon and Elkem Solar, according to DN’s website Tuesday morning.

Orkla chief executive Bjørn Wiggens said the sale was in line with Orkla’s strategy to focus on its brand name products, mostly in the food industry. Elkem employees quickly expressed concerns over potential job losses, but Orkla management did its best to dampen such worries.

While Orkla’s bosses wanted to reduce the company’s exposure to the solar industry, Bluestar wants to  develop it, so Elkem’s employees can expect expansion instead of retraction. Wiggens claimed that Elkem workers will now get a new owner that represents a “strong industrial culture” that has the capital and market access to further develop Elkem’s operations, not least Elkem Solar’s energy-effective process for producing solar-grade silicon.

The sale to the large Chinese unit of state-owned giant ChinaChem does not include Orkla’s shares in Elkem Energi AS or its 85 percent take in AS Saudefaldene.

The sale will, however, amount to most of what’s left of Elkem after it sold its aluminium operations to Alcoa. Elkem’s main products now are solar grade silicon, special alloys for the foundry industry, silicon, carbon, microsilica and energy. DN reported that some analysts have valued the company at as high as NOK 15 billion, but NOK 12 billion was the level reached after last year’s third quarter.

Elkem, founded by industrialist Sam Eyde in 1904, has been wholly owned by Orkla since 2005. It currently has production facilities in Europe, North and South America, Africa and Asia and employs around 2,500. Operating revenues in 2009 amounted to NOK 7.4 billion (USD 1.23 billion).

Bluestar, by comparison, employs more than 40,000 persons outside China alone and can boast revenues of nearly NOK 40 billion a year. It’s recently been taking over European companies including Rhodia and Adisseo of France. In both of those deals, DN reported, local French management has largely been retained as have the companies’ research and development ventures.

That would seem to bode well for Elkem but some union representatives told Norwegian Broadcasting (NRK) that they feared new Chinese owners would pare jobs and make other changes. DN reported, though, that Orkla’s leadership managed to find a buyer for the vast majority of Elkem that seems genuinely interested in Elkem’s solar operations along with its research and development activities.

The Orkla-Bluestar deal comes after months of rocky relations between Norway and China, which was furious over the awarding of the Nobel Peace Prize to Liu. Negotiations over a bilateral trade agreement between China and Norway have been suspended and Chinese officials cancelled meetings with Norway’s fisheries minister in October.

DN reported that announcement of the sale of Elkem was delayed because of the fuss over the Peace Prize but ready to move forward once again. While some Norwegians expressed concerns over Elkem’s takeover by Chinese interests, others undoubtedly are relieved that China is still keen to do business in Norway. Trade Minister Trond Giske has been disappointed over the suspension of trade talks, but otherwise has tried to stay out of the fray, apparently hoping tensions would ease over time.

Views and News from Norway/Nina Berglund
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