Deal valued at Euro 670m to create new industry champion.

Ineos Capital has agreed to buy Norsk Hydro’s Polymers business, recently renamed Kerling ASA, for a total of €670 million subject to regulatory approvals. The fast growing UK chemicals group will add Hydro’s PVC business to its Ineos Vinyls assets, previous known as EVC, to create a major chlor alkali and PVC group with assets across Europe. The enlarged grouping would have an estimated PVC capacity of above 1.5 million tonnes a year.

Norsk Hydro’s Kerling subsidiary employs 1200 people and has production facilities in both Norway and Sweden as well as the UK facility at Newton Aycliffe in County Durham. It also has an interest in joint ventures in Norway, Qatar and China and a holding in Portugal’s Cires concern.

Jim Ratcliffe, Ineos chief executive, says the deal provides a very good strategic fit with the company and a significant opportunity for continued growth. Hydro’s president and chief executive Eivind Reiten says the company “is contributing to creating a new industry champion, well positioned to pursue opportunities for long term growth.”

Previous history shows a 1998 unsuccessful attempt to merge the two companies followed by evidence of Norsk Hydro’s growing readiness to sell the PVC business; in December last year, the company announced that it was considering listing Hydro Polymers on the Oslo stock exchange or divesting it.

Obvious synergies include a north-south European emphasis on the part of the two protagonists as well as opportunities on the feedstock side. The main Ineos facility in the UK is at Runcorn, which has seen major investment in VCM feedstock capacity and efficiency. The $36bn privately owned group’s largest PVC plant is at Wilhelmshafen, in northern Germany, where it is planning to build a new cracker.

Financing for the deal announced today comes from Barclays Capital and Merrill Lynch.