Aramco issued a press release today informing that it had signed a definitive agreement to acquire from Sumitomo Chemical an additional stake of approximately 22.5%, worth $702 million, in Rabigh Refining and Petrochemical Co. (Petro Rabigh), the complex located on the Kingdom of Saudi Arabia’s west coast.
According to the release, Aramco and Tokyo-headquartered Sumitomo Chemical own each 37.5% of shares in Petro Rabigh, which was listed on the Saudi Exchange in 2008. Upon the completion of the transaction, in which a share is priced at SAR7, Aramco will become Petro Rabigh’s largest shareholder with an equity stake of approximately 60%, while Sumitomo Chemical will retain an equity stake of 15%.
The transaction, which is subject to customary closing conditions, including regulatory approvals and other third-party approvals, is part of a package of financial measures intended to reinforce Petro Rabigh’s financial position.
Under the terms of the share sale and purchase agreement, all proceeds received by Sumitomo Chemical from the sale will be injected into Petro Rabigh, through a mechanism to be agreed upon with Petro Rabigh.
Aramco will provide additional funds to Petro Rabigh, via a mechanism also to be agreed upon, matching the $702m from Sumitomo Chemical, to improve Petro Rabigh’s financial position and support its future strategy, bringing the aggregate injection amount to US$1.4 billion, according to the release.
Aramco and Sumitomo Chemical have agreed to a phased waiver of shareholder loans of $750m each, which will result in a $1.5 billion direct reduction in Petro Rabigh’s liabilities.
These measures, said the release, are expected to improve Petro Rabigh’s balance sheet and cash liquidity, as part of a remedial plan that Aramco and Sumitomo Chemical intend to explore with Petro Rabigh, which also includes initiatives to upgrade the refinery to help improve the profitability of its business.
The agreement is also in line with Aramco’s downstream expansion and Sumitomo Chemical’s move away from commodity chemicals toward specialty chemicals.
Aramco Senior Vice President of Fuels Hussain Al Qahtani said: “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.”
Sumitomo Chemical Senior Managing Executive Officer Seiji Takeuchi said that amid the evolving business landscape in 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 its future plans.
According to him, the transaction will significantly enhance Petro Rabigh’s financial position.
Source: www.spa.gov.sa