Hydro divests Rolling division to KPS Capital Partners for €1,380 million

The Norwegian aluminium company Norsk Hydro ASA has set foot to sell its rolling division to KPS Capital Partners for EUR 1,380 million on an enterprise value basis. This is considered as a major step on Hydro's agenda to enhance profitability and drive sustainability.

The transaction comprises seven plants, one R&D centre, global sales offices, and around 5,000 employees of which 650 employees in Norway and the remaining mainly in Germany.

Hilde Merete Aasheim, President and CEO, Hydro said: “Hydro launched a strategic review of our Rolling business area in 2019, along with other strategic measures towards profitability and sustainability. 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.”

“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 aluminium, while exploring new growth in areas where our capabilities match global megatrends,” added Aasheim.

In 2020, Hydro Rolling contributed approximately NOK 24 billion in revenue, 17% of Hydro total and NOK 1.3 billion in Underlying EBITDA, 9% of Hydro total. The sales amounted to 864,000 tonnes, serving segments including Can, Foil, Lithography, Automotive and General Engineering.

In addition to delivering on Hydro’s strategic ambitions, the sale will assist in strengthening the balance sheet.

KPS Capital Partners is a well-regarded and operationally focused global private equity firm, with a history of holding significant interests in metals and automotive enterprises. KPS Capital Partners is aligned with Hydro on having safety as a priority on the agenda and is well-positioned to execute on improvements identified in the strategic review of Rolling. They also have established relationship and Framework Agreements with the German unions IG Metall and IG BCE.

Michael Psaros, Co-Founder and Co-Managing Partner of KPS Capital Partners, said: “KPS is enthusiastic about the opportunity to further develop Rolling to its full potential, including providing the resources necessary to execute a business transformation. We have spent three months closely analyzing the business in the customary detailed due diligence, 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.”

The agreed transaction price of €1,380 million will result in a reduction of €856 million in pension liabilities and €435 million cash proceeds. The transaction is subject to customary approvals from competition authorities and is expected to be completed during the second half of 2021. Executive Vice President and Head of Hydro Rolling, Einar Glomnes, will become CEO of the new company after closing.

The Rolling operations will be treated as an asset held for sale and discontinued operations in Hydro’s financial reporting from the first quarter of 2021. The valuation indicates an impairment of EUR 160 - 190 million, which will be included in the annual financial statements for 2020.