OSLO (AFP) - Norwegian aluminium producer Norsk Hydro said on Sunday it would buy the aluminium assets of Brazilian mining giant Vale for 4.9 billion dollars (3.7 billion euros), in the biggest acquisition abroad by a Norwegian company.

• Norsk Hydro warns of overcapacity

Under the deal, Vale will get 1.1 billion dollars in cash and 3.1 billion dollars in new Hydro Norsk shares, while the Norwegian company will absorb 700 million dollars of Vale debt.

The agreement will leave Vale owning a 22 percent stake in Norsk Hydro, making the Brazilian company Norsk Hydro's second biggest shareholder after the Norwegian government.

Norsk Hydro will acquire Vale's 51 percent share in the Albras aluminium plant, the Brazilian company's 57 percent share in the Alunorte refinery and its 60 percent stake the Paragominas bauxite mine.

Alunorte is the world's biggest aluminium refinery and Paragominas is the third largest bauxite mine.

With Paragominas, Norsk Hydro will have enough reserves of bauxite, an ore from which aluminium is produced, to maintain its current production level for around 100 years, the company said in a statement.

The transaction will make Norsk Hydro "present in the entire chain" of production, board president Terje Vareberg told a press conference.

The deal is expected to be completed in the fourth quarter and must be approved by competition regulators.

To finance the operation, which represents more than half of Norsk Hydro's stock value, the company will seek to increase its capital in order to raise 10 billion Norwegian kroner (1.75 billion dollars).

The Norwegian government will support the transaction by lowering its stake to 34.5 percent from 43.8 percent before raising it again.

"It is important for the state to remain a big, long-term shareholder of Norsk Hydro," Commerce and Industry Minister Trond Giske said in a statement, adding that the government would raise its stake back toward 40 percent.

Norks Hydro reported on Tuesday that it was back in the green in the first quarter with a net profit of 869 million kroner after the global economic crisis hit the construction and auto sectors.