Saudi Aramco, a leading petroleum and natural gas company in the world, has agreed to acquire an additional stake of 22.5 percent in Petro Rabigh, a prominent company that produces and markets refined hydrogen and petrochemicals.
Aramco will buy additional stake from Sumitomo Chemical for $702 million. Currently, both Aramco and Sumitomo Chemical own 37.5 percent of shares in Petro Rabigh. After the completion of this transaction, which is subject to regulatory approvals and other third party approvals, Aramco will emerge as the largest shareholder with a equity stake of 60 percent.
Under the agreement, all proceeds from the sale by Sumitomo Chemical will be transferred to Petro Rabigh, through a mechanism to be agreed with Petro Rabigh. Aramco will also provide additional funds to Petro Rabigh, matching $702m from Sumitomo Chemical to improve financial status and future strategy of Petro Rabigh, bringing the aggregate injection amount to $41.4 billion.
In addition to this, Aramco and Sumitomo Chemical have agreed to a phased waiver of shareholder loans of $750m each, which will lead to direct reduction of $1.5 billion in Petro Rabigh’s liabilities.
Both parties seek to explore a remedial plan with Petro Rabigh that involves improving Petro Rabigh’s balance sheet and cash liquidity with an aim to enhance the profitability of the business. This agreement also falls in line with Aramco’s downstream expansion and Sumitomo’s Chemical move away from commodity chemicals toward specialty chemicals.
Hussain A. Al Qahtani Senior Vice President of Fuels – Aramco
“Aramco continues to identify opportunities to strengthen its downstream value chain, secure placement of its upstream crude oil with affiliated refineries, and convert more of its hydrocarbons into high-value materials. By increasing our shareholding, we expect to achieve even closer integration with Petro Rabigh and facilitate its turnaround strategy. We look forward to building on our existing relationship with Petro Rabigh, in alignment with our strategic goals.”
Seiji Takeuchi, Sumitomo Chemical Senior Managing Executive Officer, stated that, “Amid the evolving business landscape in both the refining and petrochemical sectors, Aramco and Sumitomo Chemical have considered options to find an appropriate turnaround strategy for Petro Rabigh and identify an appropriate framework to facilitate Petro Rabigh’s future plans. We believe this transaction, which aligns with the strategic directions Aramco and Sumitomo Chemical are respectively pursuing, will significantly enhance Petro Rabigh’s financial position.”
