The FINANCIAL — Saudi Aramco subsidiary, Aramco Overseas Company, and German specialty chemicals company LANXESS have signed a 50:50 joint venture agreement to create a new company for the development, production, marketing, sale and distribution of synthetic rubber used in the global tire industry, auto-parts manufacturing and a wide range of other applications.
LANXESS will contribute its existing synthetic rubber businesses to the joint venture. The businesses have 3,700 highly skilled employees, an established footprint of 20 production sites and 4 global research centers in nine countries across Europe, Asia and the Americas. In 2014 the business contributed approximately 3 Billion Euro to LANXESS group revenues, according to Saudi Aramco.
Saudi Aramco, through its subsidiary Aramco Overseas Company, will establish its stake in the new joint venture company via a share subscription and will bring financial stability, additional scale and resources, continued investment in technology, unrivalled opportunities to integrate with petrochemical facilities, and cost-competitive access to reliable feedstock supplies to the venture.
“This is yet another major step forward in Saudi Aramco’s globally-integrated downstream expansion strategy. It will further enhance our competitive position in integrating our diverse portfolio,” said Amin H. Nasser, president and CEO, Saudi Aramco. “Partnering with a world-class company like Lanxess will help scale up our global presence, and in turn create more opportunities for sustainable growth in Saudi Arabia and in markets around the world.”
Abdulrahman Al-Wuhaib, Senior Vice President Downstream, Saudi Aramco said: “Through the joint venture agreement we are investing in a world-class synthetic rubber and elastomer products capability that already supplies many of the world’s largest tire and automotive-parts manufacturing customers. In addition to creating a new revenue stream for Saudi Aramco, the agreement will spur economic growth and diversification opportunities for the Kingdom of Saudi Arabia and the Middle East region in high-volume sectors, such as tire and auto-parts manufacturing, that are dependent on higher-margin, value-added chemicals products.”
The LANXESS existing synthetic rubber businesses supply high-performance and versatile products used to produce high-quality synthetic rubbers for the global tire industry and functional components for the automotive, gas/oil exploration and production and mechanical, construction and cable engineering industries. The portfolio is complemented by reliable, high-quality and global technical service.
LANXESS CEO, Matthias Zachert said: “Saudi Aramco provides the best strategic fit for the business and its employees, and there is compelling industrial logic to the deal. Adding greater stability, R&D focus, and unrivalled access to feedstock to our world class product portfolio will give the new joint venture the opportunity of long-term and sustainable growth that also benefits our expanding global customer base.”
The transaction is subject to approval of the relevant antitrust authorities. Closing of the transaction is expected in the first half of 2016.