Pro Forma Information for Hydro and VAW
OSLO, Norway--Feb. 18, 2002--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.
Pro forma Information
The following unaudited pro forma information has been prepared assuming VAW was acquired as of the beginning of 2001.
Consolidated
Hydro VAW Pro Forma Consolidated Pro
Amounts in NOK million NOK NOK adjustments Pro Forma Forma
NOK NOK EUR
Cash and cash
equivalents 27,148 191 -13,632 13,707 1,721
Other liquid assets 2,421 96 2,517 316
Receivables 34,960 6,947 41,907 5,260
Inventories 15,794 4,939 701 21,434 2,690
Total current assets 80,323 12,173 -12,931 79,565 9,987
Property, plant and
equipment 95,277 11,153 10,357 116,787 14,659
Other assets 22,322 4,047 -294 26,075 3,273
Total non-current
assets 117,599 15,200 10,063 142,862 17,932
Total assets 197,922 27,373 -2,868 222,427 27,919
Current liabilities 42,993 7,058 2,403 52,454 6,584
Long-term liabilities 79,085 10,181 4,536 93,802 11,774
Minority shareholders'
equity 1,051 327 1,378 173
Shareholders' equity 74,793 9,807 -9,807 74,793 9,388
Total liabilities and
shareholders equity 197,922 27,373 -2,868 222,427 27,919
Year 2001
Amounts in million NOK NOK NOK NOK EUR
Operating revenues 152,835 30,697 -2,965 180,567 22,435
Operating income 21,083 2,406 -757 22,732 2,824
Earnings before interest
exp. and tax (EBIT) 25,074 2,753 -1,726 26,101 3,243
EBITDA 37,757 3,839 -968 40,628 5,048
Net income 7,892 1,473 -1,140 8,225 1,022
Earnings per share
in NOK 30.5 31.8 4.0
Average number of
outstanding shares 258,434,202 258,434,202
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 takeover of the business. The preliminary allocation 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.
Condensed financial statements for VAW for 2001 and 2000:
2001 2000
Amounts in million EUR
Total sales 3814 3480
EBITDA 477 370
Depreciation and amortization 135 109
EBIT 342 261
Total assets 3436 2915
Total debt 2205 1802
Shareholder's equity 1231 1113