Saudi Aramco buys 50% stake in Lanxess rubber unit

Saudi Aramco subsidiary, Aramco Overseas Co., has bought a 50 percent stake in the synthetic rubber division of German chemicals groups, Lanxess, for EUR 1.2 billion, the oil major said.

Saudi Aramco and 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 products.

The transaction, which values the entire unit at EUR 2.75 billion, is subject to approval of the relevant antitrust authorities, and is expected to be closed in the first half of 2016.

The two partners agreed to not sell their stakes for five years, and will equally share the cash flow of the project for three years.

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 EUR 3 billion to Lanxess group revenues.

Lanxess is also looking for reliable butadiene supplier to offset the market fluctuation.

Lanxess said it plans to use proceeds from the stake sale “for future growth, the reduction of debt, and a share buy-back.”