 "Lanxess and Saudi Aramco form JV for synthetic rubber")
German specialty chemicals company Lanxess and Saudi Aramco have signed an agreement to establish a joint venture for synthetic rubber. Lanxess and Saudi Aramco subsidiary, Aramco Overseas Company, will each hold a 50 percent interest in the joint venture, with annual sales of approximately three billion Euro in 2014. Saudi Aramco will pay approximately Euro 1.2 billion in cash for its 50 percent share after deducting debt and other financial liabilities. The total joint venture is valued at Euro 2.75 billion.
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 tyres and technical applications such as hoses, belts and seals. The main customers include the automotive and tyre industries but the products are also used in the construction industry and by oil & gas companies.
Saudi Aramco will provide the joint venture with competitive and reliable access to strategic raw materials over the medium term.
Abdulrahman Al-Wuhaib, senior vice president downstream, Saudi Aramco, commented, “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 tyre 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 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.
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. 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,” said Zachert.
Lanxess plans to use around Euro 400 million of the proceeds from the transaction to invest in the growth of the well-positioned and less cyclical segments Advanced Intermediates and Performance Chemicals.
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 tyres and technical applications such as hoses, belts and seals. The main customers include the automotive and tyre industries but the products are also used in the construction industry and by oil & gas companies.
Saudi Aramco will provide the joint venture with competitive and reliable access to strategic raw materials over the medium term.
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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. 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,” said Matthias Zachert, CEO, Lanxess.
Abdulrahman Al-Wuhaib, senior vice president downstream, Saudi Aramco, commented, “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 tyre 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 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.
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. 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,” said Zachert.
Lanxess plans to use around Euro 400 million of the proceeds from the transaction to invest in the growth of the well-positioned and less cyclical segments Advanced Intermediates and Performance Chemicals.