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Orkla sells Elkem to China's BlueStar for $2 billion

OSLO (Reuters) - Norwegian conglomerate Orkla agreed to sell its Elkem unit’s silicon operations to China National BlueStar for $2 billion in one of the biggest industrial takeovers by a Chinese group in Europe.

The agreement marks a return to “business-as-usual” between China and Norway, a top Oslo politician said, after Beijing’s fury at the Norwegian Nobel Committee’s decision to award the 2010 Nobel Peace Prize to Chinese dissident Liu Xiaobo.

The deal will also give state-run specialty chemicals company BlueStar, backed by U.S. private equity firm Blackstone Group, access to what it said is “industry-leading” technology.

Elkem produces high-grade silicon for the solar industry and computers. By its own account it serves about half the world’s demand for silicon used in electronic components.

Pizzas-to-metals conglomerate Orkla has been looking to slim down its business lines and a sale was widely expected, although some analysts said the price for Elkem was a bit low.

Elkem says it produces solar-grade silicon using only a quarter of the energy consumed with traditional technology -- which could help China cut its world-leading CO2 emissions.

The transaction covers Elkem’s silicon-related operations such as Elkem Silicon Materials, Elkem Foundry Products, Elkem Carbon and Elkem Solar but not the energy unit Elkem Energi.

The deal’s size puts it in the same ballpark as Zhejiang Geely’s $1.8 billion purchase of Ford’s Volvo cars unit in 2010 but behind Sinopec’s $7.2 billion deal for Swiss Addax Petroleum in 2009.

MARKET DISAPPOINTMENT

Shares in Orkla fell 1.39 percent to 56.6 crowns at 1326 GMT against an Oslo benchmark index up 0.6 percent.

Analyst Per Haagensen at Fondsfinans said the price was fair but probably to the downside of some investors’ expectations.

“There is perhaps a slight disappointment in the market that is impacting the share price today,” he said. “There was a hope in the market that perhaps one could get a premium price on the solar aspect (of the business).”

But the deal helped warm cold ties between Beijing and Oslo.

China postponed trade talks with Norway indefinitely and snubbed Norwegian government officials after Liu’s Nobel win in October, raising fears a number of corporate deals may be hurt.

Norway’s Trade and Industry Minister Trond Giske said on Monday that an Elkem deal would be “a sign that China has a ‘business as usual’ attitude.

ORKLA SELL-OFFS TO CONTINUE

Orkla’s Chief Executive Bjoern Wiggen told a news conference that the conglomerate will use the proceeds from the deal to cut debt and increase financial flexibility.

“We will continue to invest in (aluminum products maker) Sapa and (consumer products unit) Orkla Brands,” he said.

Wiggen told Reuters Orkla would not pay an extraordinary dividend as a result of the Elkem sale.

“But if we come in a situation in which we have cash we don’t have a direct use for over the next six to 12 months, we will consider a dividend or share buyback,” he said.

Orkla said it will continue its sell-off drive and might also exit from its chemicals business or its 40 percent stake in solar firm REC, but Wiggen said the time was not right for selling REC.

“The way it is looking now, we feel that the value of REC is low,” he said. “In the short-term we will work to develop the value of the company, as a good and big owner.”

Globe Specialty Metals and South Korean company POSCO were also tipped as suitors for Elkem.

Elkem has production facilities in Europe, North and South America, Africa and Asia, and employs about 2,500 people.

Orkla said it expected the deal to be completed in the first half of the year.

BlueStar was advised by Royal Bank of Scotland, while Orkla was advised by Moelis and Company.

(Additional reporting by Henrik Stoelen and Gwladys Fouche; Editing by Jane Merriman and Hans Peters)

$1 = 5.967 Norwegian crowns

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