EVC And Norsk Hydro's Petrochemicals Division Announce Their Intention to Merge.

AMSTERDAM/OSLO, Norway--(BUSINESS WIRE)--July 6, 1998--EVC International NV of The Netherlands and the Norwegian energy group Norsk Hydro ASA have signed a non-binding letter of intent to merge the major part of Norsk Hydro's Petrochemicals Division and EVC thereby creating a leading integrated global player in the vinyl industry.

The merged entity will benefit from the strong complementarity of the two businesses. The company will have a leading market position in Europe as well as leadership in technology, research and development. EVC and Hydro expect to achieve annual synergies of NLG 80 million (NOK 300 million) over the next three years.

EVC and Hydro view the deal as a merger of equals. The Management Board of the new entity will be composed of two members from each of the parties. Ettore dell'Isola, Chairman of EVC Management Board is proposed as CEO of the merged group. EVC will issue new ordinary shares in exchange for the agreed assets of Norsk Hydro's Petrochemicals Division. Through this transaction, Norsk Hydro will hold 45% of the shares in the merged company. Corporate Governance provisions have been agreed to ensure the continuity of EVC as a public listed company. A new name for the merged group is expected to be announced before completion of the merger.

Commenting on the proposed merger, Ettore dell'Isola, Chairman of EVC Management Board said: "The combination of the two entities will yield significant benefits to shareholders as it is expected to create valuable synergies to be achieved mainly by the optimisation of logistic costs and reductions in fixed and variable production costs. The position of Norsk Hydro will ensure that the merged group will have a strong shareholder base."

Egil Myklebust, President and CEO of Norsk Hydro said: "It has been the ambition of Norsk Hydro to have an active participation in the restructuring of the European vinyl industry. We consider the proposed merger as an important move in this necessary process, creating a strong entity with a good platform for future growth."

The assets contributed by Norsk Hydro excludes the interests in the ethylene cracker at Rafnes, Norway, and the fabricating activities. The companies will undertake a study of the future ethylene needs of the combined entity including clarification of the future relationship between the company and Norsk Hydro's 51% share in the Rafnes cracker. The merger will position the new entity as one of the four largest PVC producers in the world. The merged company will have a total annual European capacity of 1.8 million tonnes of PVC and 1.9 million tonnes of VCM. Existing and planned operations in Asia and elsewhere will provide a springboard for further development.

EVC employs nearly 4,000 people, mainly in Italy, Germany, UK, other European countries and India. Sales in 1997 totalled NLG 2.4 billion (NOK 9 billion). Norsk Hydro's Petrochemicals Division has 3,000 employees, mainly in Norway, Sweden and UK. Sales in 1997 totalled NOK 6 billion (NLG 1.6 billion).

The two companies expect the merged entity to be in operation at the end of the year.

The merger is subject to the approval of the Boards of the two companies, of EVC Shareholders' General Meeting, Norsk Hydro's Corporate Assembly as well as to the approval of the relevant authorities.

COMPANIES' PROFILES

EVC International NV

Evc International NV is the largest PVC manufacturer in Europe and the fourth largest in the world. Its production facilities have a capacity of 1.3 million tonnes per year of PVC resin, which represents approximately 22% of total West European capacity.

EVC's activities are vertically integrated through most of the PVC manufacturing chain and include the manufacture and sale of EDC (ethylene dichloride), VCM (vinyl chloride monomer), PVC resins, compounds and rigid films. Key raw materials are obtained externally through long term supply agreements. EVC's integration downstream into compounds and rigid films provides an outlet for about 20% of its production of PVC resins. External sales of EVC's products are spread across Europe with a concentration in the areas where the Group's operations are located.

EVC has a strong global position in vinyl technology. EVC sells a full range of state-of-the-art technologies on a world-wide basis and it is the market leader in Oxychlorination (EDC) and Clean Reactor (PVC) technologies. In particular, in the past seven years more than 50% of all the new oxychlorination capacity has been built using EVC Fixed Bed technology, and EVC Clean Reactor technology is currently used for 80% of world-wide PVC production.

Turnover in 1997 was NLG 2.4 billion and the Group employs nearly 4,000 people with production sites in the UK, Italy, Germany, Switzerland, Spain and India.

The offices of EVC International NV, the holding company of the EVC Group are in Amsterdam, The Netherlands, where the company is listed at the Stock Exchange, while corporate activities are co-ordinated on an international level from Brussels, Belgium.

Norsk Hydro

Norsk Hydro is a Norwegian based energy and industrial company with international activities covering the oil and gas, fertilizer, light metals and petrochemicals industries. The company employs over 38,000 people with operating revenues in 1997 amounting to NOK 96 billion.

Norsk Hydro's Petrochemicals Division is the Northern European leading producer of VCM and PVC, with production plants in Norway, Sweden, UK and Singapore and further investments in Portugal, Singapore, China, India, Malaysia and Qatar.

The company is involved in all stages of PVC production. Salt and natural gas liquids from the North Sea are used to produce ethylene and chlorine, the basic products, and the intermediate product VCM, which is the basis for PVC production. Hydro also sells VCM in Europe and Asia.

Hydro is the largest PVC supplier in the Nordic countries with a market share in 1997 of approximately 49 percent. In the UK, Hydro has approximately 27 percent of the market. The company's market position and production facilities in Singapore, China and India provide a foothold in important growing markets for plastic materials.

Hydro's production facilities are capable of producing capacities of ca. 440,000 tonnes of S-PVC, 75,000 tonnes of E-PVC and 170,000 tonnes of PVC compounds, per annum. In addition, the annual production capacities are 250,000 tonnes of chlorine, 275,000 tonnes of caustic soda, 200,000 tonnes of ethylene and 595,000 tonnes of VCM.

The Petrochemicals Division has 3,000 employees. In 1997, operating income was NOK 469 million (NLG 124 million) and operating revenue NOK 6,034 million (NLG 1.6 billion). Investments totalled NOK 556 million (NLG 147 million). The divisional headquarters is located in Oslo, Norway.

CONTACT: EVC International NV

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