Lanxess AG (Cologne, Germany; www.lanxess.com) and Saudi Aramco (www.saudiaramco.com) plan to establish a joint venture (JV) for synthetic rubber detailed in an agreement signed today. Lanxess and Saudi Aramco subsidiary, Aramco Overseas Co., will each hold a 50% interest in the JV, with annual sales of approximately three billion euro in 2014. Saudi Aramco is to pay approx. EUR 1.2 billion in cash for its 50% share after deducting debt and other financial liabilities. The total joint venture is valued at EUR 2.75 billion.
The transaction still requires the approval of the relevant antitrust authorities and is expected to be completed in the first half of 2016.
Lanxess will contribute its synthetic rubber business to the new JV. This will include the Tire & Specialty Rubbers (TSR) and the High Performance Elastomers (HPE) business units, their 20 production facilities in nine countries and some 3,700 employees and additional support staff. The high-performance rubbers manufactured by Lanxess are mainly used in the production of tires and technical applications such as hoses, belts and seals. The main customers include the automotive and tire industries, but the products are also used in the construction industry and by oil and gas companies.
Saudi Aramco will provide the JV with competitive and reliable access to strategic raw materials over the medium term.
The JV brings together the world’s largest producer of synthetic rubber and the world’s largest oil and energy producer to form a far-reaching strategic partnership, says Lanxess. “This alliance will enable us to give the rubber business a very strong competitive position and the best possible future perspectives”, says Lanxess CEO Matthias Zachert. “Together in the future we can produce synthetic rubber in an integrated value chain from the oil field to the end product, thus establishing one of the best positioned suppliers in the world market. In this way, we will be able to offer our customers even greater reliability than before.”
Abdulrahman Al-Wuhaib, senior vice president Downstream, Saudi Aramco says: “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 new JV will be managed by a holding company headquartered in the Netherlands. The CEO will be appointed by Lanxess and the CFO will be appointed by Aramco Overseas Co. Each company will have equal representation on the JV’s board of directors. Lanxess will consolidate the JV’s financials.