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Major Hydro transaction in Brazil

Norwegian aluminium producer Norsk Hydro ASA has signed an agreement to take over Brazilian mining company Vale S.A’s aluminium businesses, at a cost of NOK 30 billion (US$ 4.9 billion).

The agreement combines the majority of Vale’s bauxite, alumina and aluminium assets with Hydro’s existing business.

A press release states that the transaction transforms Hydro into a fully integrated global aluminium company securing the company’s bauxite supplies in 100-year perspective.

”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,” said Hydro’s President and CEO Svein Richard Brandtzæg.

The transaction is planned to be supported by a rights issue of about NOK 10 billion.

The Norwegian Government is positive to the transactions, and says that , under certain conditions, it is positive to participate in the rights issue with its pro rata share.

– Hydro is a leader in its industry and among the largest Norwegian companies. The government supports investments which ensure continued industrial growth in the company. We think a participation in the rights issue will be a good investment for the Norwegian state, says Trond Giske, Minister of Trade and Industry.

– We have stated in our ownership policy documents that the state has commercial objectives with its ownership in Hydro, but also an objective to ensure that head office functions remain in Norway. The government believes that the state should have a large ownership interest in Hydro. The transaction will dilute the state’s holding down towards 34 per cent. The state’s ambition in the longer term will be to bring its holding up towards 40 per cent.