Norway’s Norsk Hydro to Buy Vale Assets for $4.9 Billion

Norwegian producer and Europe’s third- largest aluminum maker Norsk Hydro ASA entered into a $4.9 billion deal Sunday to take over mining company Vale SA’s (VALE) aluminum operations in Brazil, securing the chief ore of aluminum supplies to last it for a century.

According to the deal, which is Norway’s biggest ever, in terms of its foreign acquisition, Vale, the world’s largest iron ore miner and a leader in nickel, will receive $1.1 billion in cash and a 22% stake in Norsk Hydro for its assets. In addition, Oslo-based Hydro will assume a net debt of $ 700 million. Hydro said it plans to raise $1.7 billion  selling shares to help finance the deal.

About the transaction:

Vale: “Under the terms of the agreement, upon completion, Vale will transfer to Hydro: (a) 51.0% of the total capital of Albras; (b) 57.0% of the total capital of Alunorte; (c) 61.0% of the total capital of CAP; and sell (d) 60.0% of the total capital of the Bauxite JV. In addition, Vale will own the remaining 40% equity interest in “Bauxite JV”, which will be fully divested until 2015.

Vale’s shares in Hydro will have a two-year lock-up period after the closing, in which they cannot be divested. Furthermore, Vale will be entitled to have one representative on Hydro’s Board of Directors, subject to approval by Hydro’s governing bodies. Pursuant to the transaction agreements, Vale cannot increase its ownership in Hydro beyond its 22% stake.

The transaction has been approved by the Board of Directors of both Vale and Hydro.”

The deal, which will be completed in the fourth quarter of 2010, values Vale’s stake in Hydro at $3.1 billion.

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