This week Hydro purchased the remaining 50% of Sapa they did not already own in order to approach the European sector as a coordinated entity, versus competing as the number one and two players in a then-difficult market.
Because an IPO was apparently not feasible, and Hydro is currently cash-rich, the companies decided to pursue this route. Total implied value was $3.2 billion and 11.2x EV / EBIT.
As almost everything in the U.S. is already Sapa-branded, the deal will likely allow them to pursue efficiency gains with their production footprint here in the U.S., particularly with closed-loop scrap management and transportation. The acquisition also allows Hydro to maintain their connectivity to original equipment manufacturer (OEM) customers, particularly with the ongoing growth of aluminium in automotive applications.
It is clear Orkla had always planned to eventually divest its share of the joint venture (JV), and of course the move prevents Orkla’s JV share from going elsewhere.