Lanxess_and Saudi Aramco create joint venture for synthetic rubber_Zachert_Al-Wuhaib_2

Matthias Zachert, Chairman of the Board of Management of Lanxess (right), and Abdulrahman F. Al-Wuhaib, Senior Vice President Downstream of Saudi Aramco, sign the agreement on the new Joint Venture in Cologne, Germany. (Source: Lanxess)

Nach den Worten von Abdulrahman Al-Wuhaib von Saudi Aramco erhält Saudi Arabien durch den Einstieg in das Geschäft mit Synthesekautschuk einen Zugang zu hochvolumigen Sektoren wie der Reifen- oder Autoteilebranche sowie auf margenstärkere Chemieprodukte mit höherer Wertschöpfung. (Bild: Saudi Aramco)

Nach den Worten von Abdulrahman Al-Wuhaib von Saudi Aramco erhält Saudi Arabien durch den Einstieg in das Geschäft mit Synthesekautschuk einen Zugang zu hochvolumigen Sektoren wie der Reifen- oder Autoteilebranche sowie auf margenstärkere Chemieprodukte mit höherer Wertschöpfung. (Bild: Saudi Aramco)

Specialty chemicals company Lanxess, Cologne, and Saudi-Arabian oil and gas producer Saudi Aramco plan to establish a joint venture for synthetic rubber detailed in an agreement signed today. Saudi Aramco is to pay approximately € 1.2bn in cash for its 50 percent share after deducting debt and other financial liabilities.

Lanxess and Saudi Aramco subsidiary, Aramco Overseas Company, will each hold a 50 percent interest in the joint venture, with annual sales of approximately € 3bn in 2014. The total joint venture is valued at € 2.75bn. 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. Saudi Aramco will provide the joint venture with competitive and reliable access to strategic raw materials over the medium term.

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.”

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.”

Matthias Zachert, Chairman of the Board of Management of Lanxess (right), and Abdulrahman F. Al-Wuhaib, Senior Vice President Downstream of Saudi Aramco, have signed the agreement on the new Joint Venture in Cologne, Germany. (Source: Lanxess)

Matthias Zachert (right) and Abdulrahman F. Al-Wuhaib have signed the agreement on the new Joint Venture in Cologne, Germany. (Source: Lanxess)

The new joint venture 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 Company. Each company will have equal representation on the JV’s board of directors. Lanxess will consolidate the JV’s financials.

With the creation of this joint venture, Lanxess is implementing the third stage of its three-phase realignment program. “We have established a completely new strategic starting point for our company in just over a year”, said Zachert. “Not only have we streamlined our administrative functions and already made many of our production structures and processes more efficient but with this joint venture in the rubber business we are delivering on the most important phase of our realignment – with the best partner possible and in a very short period of time. The resulting financial headroom will allow us to return to growth considerably sooner than expected.”

Lanxess plans to use around € 400m of the proceeds from the transaction to invest in the growth of the well-positioned and less cyclical segments Advanced Intermediates and Performance Chemicals. Another roughly € 400m is earmarked for a further reduction of its financial debt position and around € 200m are planned to be used for a share buyback program.

(dw)

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