As previously announced, Hydro has entered into an agreement to purchase all the outstanding shares of VAW aluminium AG. The consideration, calculated as of 1 January, 2002, for all outstanding shares amounts to EUR 1,888 million (NOK 15 billion). In addition interest bearing debt of EUR 757 million (NOK 6 billion) and pension commitments of approximately EUR 450 million (NOK 3.6 billion) is assumed. The acquisition is being financed by Hydro's cash holdings and credit facilities.
The acquisition is subject to approval by the European Union competition authorities as well as the appropriate agencies of the US government. Hydro anticipates that such approvals will be forthcoming and the final terms of the acquisition, and payment for the VAW shares, can be completed in the first quarter of 2002. VAW will be included in Hydro's accounts from completion of the acquisition.
In addition to the regulatory approvals, Alcan, the Canadian aluminium company, has asserted that it has a pre-emptive right, triggered by a change of control of VAW, for VAW's 50% interest in the Alu-Norf rolling mill located in Germany. Alcan has initiated legal proceedings against VAW in Germany. VAW disputes that such a pre-emptive right exists, and Hydro supports this position.
VAW has operations in more than 20 countries. The major part of these activities are located in the EU in addition to important operations located in North America and the Pacific region. In 2001, VAW had a turnover of approximately NOK 31 billion (EUR 3.8 billion), and about 17,000 employees.
VAW is comprised of four business areas including Primary Materials, Rolled Products,
Automotive Products and Flexible Packaging. Flexible Packaging is considered outside of
Hydro's core business and will be sold. This business had a turnover of NOK 5.1 billion in 2001 (EUR 637 million) and roughly 5,350 employees.
VAW's is particularly strong in the area of rolled and cast products, complementing Hydro's substantial market position in extruded products and profiles. In the area of primary aluminium production, VAW and Hydro complement each other geographically, and their combined capacity provides a good balance for the downstream operations. VAW's activities will be integrated with Hydro's light metals business area constituting a new Hydro Aluminium business and is expected to be fully operational by July 2002.
The combined aluminium activities of Hydro and VAW are expected to generate revenue and cost synergies that will enhance the competitive position of the overall business. The synergy effects, together with other efficiency initiatives, are expected to generate annual cost savings of approximately NOK 1.6 billion by 2004 compared with Hydro's and VAW's combined cost levels in 2001. Manning reductions related to these measures are expected to be approximately 1,100 globally, of which 300 are expected to be in Norway.
This pro forma information has been prepared for comparative purposes only and does not
purport to be indicative of what would have occurred had the transaction occurred on the date described above. The pro forma information is based on Hydro's preliminary results for 2001 and preliminary results for VAW for 2001, presented in accordance with US GAAP. Some accounting principles differ from Hydro's normal application. For example, VAW uses the LIFO (last-in-first-out) method for inventory valuation. In general, uncertainty related to pro forma information is higher than for historic accounts.
Assets acquired and liabilities assumed in the VAW acquisition will be accounted for at fair value (acquisition method). Pro forma information is based on preliminary estimates for fair value of assets and liabilities in VAW. Purchase price allocation may be changed after takeoverof the business. The preliminary al location of purchase price does not indicate major intangible
assets. The preliminary allocation does not indicate goodwill in the transaction.
Pro forma adjustments are made for fair value adjustments for assets and liabilities, depreciation and amortization of these adjustments, finance cost of the acquisition price, and deferred tax related to the above mentioned adjustments. Significant sales and receivables between the companies are eliminated.
The press release inclunding tables can be downloaded from the enclosed link.
