OM Group, Inc. (OMG), headquartered in Cleveland, Ohio, announced Monday that it will sell all of its nickel assets to Russia's Norilsk Nickel for $408 million in cash. The transaction is contingent upon approval by customary regulatory authorities, and has been approved by the Board of Directors of both companies.
Norilsk, Russia's largest mining and metallurgical company, is the world's largest producer of nickel and palladium, and a major producer of platinum and copper.
As part of the transaction, Norilsk's trading subsidiary will supply raw materials for OMG's Specialties business through five-year supply agreements.
These supply agreements include up to 2,500 metric tons annually of cobalt metal, up to 2,500 metric tons a year of crude cobalt hydroxide concentrate and up to 1,500 metric tons per year of crude cobalt sulfate, along with various nickel-based raw materials used in OMG’s electronic chemicals business.
The sale follows OM Group's previously announced business plan to divest itself of its nickel operations, which it considers to be a non-core asset. OM Group plans to use the proceeds from the sale support its growth plans to transform the business into a diversified specialty chemicals and advanced materials company, according to OM Group's chairman and CEO, Joe Scaminace.
The volatility in the metal prices is among the reasons for OM Group's decision.
“While our intent was not to try to time the market, we believe this is an ideal time in the base metals cycle to exit the nickel business. In our estimation, the current value of the business is greater than its future value as it’s a capital intensive business for us where we have faced raw material feed constraints and significant price volatility,” Scaminace said.
The transaction is expected to close in the first quarter of 2007.