Norsk Hydro Strikes $1.6 Billion Deal to Sell Assets to KPS
(Bloomberg) -- Norsk Hydro ASA, one of the world’s largest aluminum producers, is selling its rolling business to private equity firm KPS Capital Partners to improve profitability as it focuses on low-carbon products.
Hydro will sell the operations, which include seven plants and about 5,000 employees, to KPS for an enterprise value of 1.38 billion euros ($1.6 billion). The divestment follows a two-year review of the struggling business.
As part of a five-year plan unveiled last year, the Norwegian aluminum maker aims to grow its recycling, renewables, and battery operations as consumer appetite for green products swells. Selling all of its rolling operations will help achieve its profit targets by 2025 and ensure the full potential of the business.
“What we get from this sale we’ll use to develop the company, strengthen the balance sheet and to be robust in a volatile industry,” Chief Executive Officer Hilde Merete Aasheim said in an interview. “We have good capabilities that support the megatrends of decarbonization, circular economy and renewable energy.”
The stock gained as much as 3.2% in Oslo trading, and was up 1.1% by 11:52 a.m. local time, taking this year’s advance to 21%.
Hydro started working with Goldman Sachs Group Inc. on a potential sale of the business last year, Bloomberg reported at the time, and was expected to wait until after the coronavirus crisis eased before starting a formal process.
The rolling division sold 864,000 tons in 2020 for cans, foil, lithography, automotive and general engineering segments. The unit contributed about 24 billion kroner in revenue and 9% of the company’s underlying earnings before interest, taxes, depreciation and amortization.
Hydro will get 435 million euros in cash from the deal, which will lower the aluminum maker’s pension liabilities by 856 million euros. The transaction is subject to the customary approvals from competition authorities and is expected to be completed during the second half.
The company isn’t planning on using the proceeds to return cash to shareholders, Chief Financial Officer Pal Kildemo said on a call with analysts.
Union representatives in Norway voiced opposition to the deal, with Industri Energi leader Frode Alfheim calling on the government to step in to safeguard profitable jobs, E24 reported.
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