Liquid gold

Oslo, Dec. 18 (Reuters): Norway’s Statoil has agreed to acquire the oil and gas activities of Norsk Hydro to create a national champion, the companies said on Monday, driving their shares up sharply.

The new company will have combined production of 1.9 million barrels per day in 2007 and proven oil and gas reserves of 6.3 billion barrels of oil equivalents, and will become the world’s largest offshore operator, the companies said.

“The recommended merger is driven by an ambition to grow in Norway and internationally,” Norway’s two biggest companies said in a joint statement.

The proposed merger is subject to approval by the general meetings of the two companies as well as by regulatory authorities, they said.

Shares in Norsk Hydro leapt 24.2 per cent to 194.0 crowns, and Statoil’s stock jumped nearly 6.7 per cent to 184.50 crowns by 0832 GMT, driving the Oslo bourse benchmark index to new all-time highs.

Norsk Hydro, the energy and aluminium group, will continue as a leading, focussed global aluminium company, Hydro said.

Hydro shareholders will hold 32.7 per cent, and Statoil’s shareholders would hold 67.3 per cent of the new company.

“Hydro’s shareholders will receive 0.8622 shares in the new company for each Hydro share and continue as owners of Hydro. Statoil shareholders will maintain their holdings in the new company on a one-for-one basis,” the companies said.

The Norwegian government will raise its stake in the new company to 67 per cent from an initial 62.5 per cent, the government said in a statement.

“Final closing is expected to be in the third quarter 2007,” the companies said, and added that in the meantime, Hydro and Statoil would be managed as separate companies.

Government support

“The new company will create huge values for Norway,” prime minister Jens Stoltenberg said in a statement. “And the merger is an excellent foundation to meet the challenges facing the oil and gas industry. The government sees the recommended merger as industrially and strategically well founded.”

Norsk Hydro will remain a separate listed company based on its aluminium and power generating business, the government said. “This creates the basis for an even further development of the aluminium business,” the government said.

“By combining forces, the new company will be a highly competent and financially strong Norway-based energy champion, well positioned to ensure continued domestic excellence and pursue international business opportunities for long-term growth,” Jan Reinaas and Jannik Lindbaek, respective chairmen of Hydro and Statoil, said in a joint statement.

“The industry faces an increasingly challenging international landscape. To merge now makes perfect sense,” said the chairmen of the firms which will be present in 40 countries.

Statoil’s chief executive Helge Lund will become CEO of the new company, and Norsk Hydro’s chief executive Eivind Reiten will become chairman and continue as head of Norsk Hydro’s aluminium company.