Norsk Hydro eyeing Asia Aluminum acquisition-letter

HONG KONG, June 22 (Reuters) - Norwegian aluminium producer Norsk Hydro (NHY.OL) has made an offer to buy troubled Asia Aluminum Holdings Ltd [ALMIN.UL], according to a letter obtained by Reuters.

The letter signed by Arnstein Sletmoe, senior vice president M&A at Norsk Hydro and addressed to the Bureau of Foreign Trade and Economic Cooperation of Zhaoqing city, Guangdong, details the Fortune 500 company's geographical and operational interest in unlisted Asia Aluminum.

Norsk said the purpose of the letter was "to secure the future of Asia Aluminum, its employees and its position as a leading producer of extruded aluminium products in Asia" and "to deliver an attractive offer for creditor groups".

Earlier, Norsk Hydro declined to comment on the acquisition reports which appeared in The Financial Times and The Wall Street Journal newspapers. [ID:nLM714784]

In March, Asia Aluminum's ratings were downgraded by both Standard & Poor's and Moody's Investors Service a day after a court appointed a liquidator for the company and following the withdrawal of a bond buyback offer.

Standard & Poor's also said the Chinese company was among a clutch of lower-rated issuers facing problems obtaining credit from banks in Asia-Pacific. [ID:nHKG332243]

Hydro has been stung by falling demand for aluminium this year exacerbated by woes in the car industry.

Nevertheless, the cash-rich company last month signed a preliminary deal to explore the possibility of building an aluminium smelter in Angola and has participated in a share issue of solar industry group NorSun. [ID:nOSN002147]

"Notwithstanding the negative effects of the current depression in aluminium prices and weak demand, Hydro has a robust financial position which includes liquid assets and unutilised revolving facilities of approximately $3.5 billion," the letter said.

For the six months to December 2008, Asia Aluminum Group reported post tax profit of HK$265 million ($34 million) on revenue of HK$3.4 billion. It had net assets of HK$4.3 billion.

At 1213 GMT Norsk Hydro shares were trading down 1.2 percent at 34.10 Norwegian crowns. ($1=HK$7.8) (Reporting by Umesh Desai; editing by Mike Nesbit)