MOSCOW (MRC) -- Saudi Arabia's state oil company is taking a 50%-stake in the synthetic rubber business of German chemicals groups Lanxess in a deal that values the entire unit at EUR2.75bn, including debt, as per Lanxess' press release.
Saudi Aramco will pay around EUR1.2bn in cash for the stake, according to a statement released on Tuesday.
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 joint venture. 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.
The joint venture 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. "This alliance will enable us to give the rubber business a very strong competitive position and the best possible future perspectives", said 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."
Lanxess had been searching for a partner for its synthetic rubber business as the industry - which supplies the material used in car tyres - comes under pressure amid falling prices and intense competition.
The partnership with Saudi Aramco will give the business access to competitively-priced commodities, including crude oil, as it looks to reduce input costs.
Lanxess said it plans to use proceeds from the stake sale "for future growth, the reduction of debt and a share buy-back".
As MRC reported previously, earlier this month, Lanxess was in talks to put its main synthetic rubber business into a joint venture with petrochemicals group Ineos, four people familiar with the matter told Reuters. Lanxess also held talks with Saudi Arabian Oil Company (Saudi Aramco) and Russia's NKNK and Sibur.
Lanxess is a leading specialty chemicals company with sales of EUR 8.0 billion in 2014 and about 16,600 employees in 29 countries. The company is currently represented at 52 production sites worldwide. The core business of Lanxess is the development, manufacturing and marketing of plastics, rubber, intermediates and specialty chemicals.
MRC