Norsk Hydro sells its aluminum rolling business

Norsk Hydro ASA, headquartered in Oslo, Norway, says it has entered into an agreement to sell its aluminum rolling business unit to New York City-based KPS Capital Partners LP for 1.38 billion euros ($1.64 billion) on an enterprise value basis. The company says the move is a “major step on Hydro's agenda to improve profitability and drive sustainability.”

A news release issued by KPS says completion of the transaction is expected in mid-2021 and is subject to customary closing conditions and approvals.

The transaction includes seven plants, one R&D center, global sales offices and approximately 5,000 employees, of which 650 are in Norway and the remaining mainly in Germany. Hyrdo’s rolling division serves customers across a diversified set of end markets, including beverage can, automotive, foil packaging and building and construction and produces approximately 1 million metric tons per year. Its Alunorf mill in Germany is the world's largest aluminum rolling mill, and its Grevenbroich mill, also in Germany, is the world's largest rolled aluminum finishing mill.

“Hydro launched a strategic review of our rolling business area in 2019, along with other strategic measures towards profitability and sustainability,” Hydro President and CEO Hilde Merete Aasheim says in a news release about the sale issued by Norsk Hydro. “We have now concluded, and our rolling business will continue its development under new ownership. This is a good solution for both Hydro and for the employees in rolling, who will continue their efforts and continued growth in a new, dedicated downstream company.”

She continues, “Hydro’s ambition is to lift profitability and drive sustainability, creating value for all stakeholders. The sale of rolling will strengthen our ability to deliver on our strategy, strengthening our position in low-carbon aluminum while exploring new growth in areas where our capabilities match global megatrends.”

"The size and global scale of the rolling business, the quality of its assets, coupled with the breadth of its products and technology capabilities, form the foundation of a tremendous investment platform,” Michael Psaros, co-founder and co-managing partner of KPS, says in the KPS-issued new release. “KPS Partner Kyle Mumford will lead a KPS team who will work closely with the company's management team to accelerate growth opportunities driven by substantial investment in the company's assets and operations. Our focus will be on innovation and new product development. We look forward to creating value by leveraging KPS' very successful, multidecade experience investing in the metals and automotive industries."

Psaros says KPS spent three months analyzing the business and “have been highly impressed with the rolling management team and look forward to partnering with them and the entire Rolling team to invest in and grow the business.”

Einar Glomnes, executive vice president of Norsk Hydro’s rolling business, says, "We are excited to operate under KPS' ownership as an independent company. This is a great day for all stakeholders of our rolling business, especially our customers and employees. KPS has a demonstrated track record of creating and building industry-leading companies and has enjoyed tremendous success investing in the metals and automotive industries. KPS' global reach, commitment to manufacturing excellence and safety and significant financial resources will enable our company to accelerate growth and invest in industry-leading technologies while maintaining our focus on quality and customer service."

Glomnes will become CEO of the new company after closing.

In 2020, Hydro's rolling business contributed approximately 17 percent of Hydro’s total revenue and 9 percent of the company’s total underlying earnings before interest, taxes, depreciation and amortization.

In addition to delivering on Hydro’s strategic ambitions, the sale will assist in strengthening the balance sheet, the company says, resulting in a reduction of 856 million euros (roughly $1 billion) in pension liabilities and 435 million euros ($518 million) in cash proceeds, according to the company.