Lanxess and Saudi Aramco create joint venture for synthetic rubber

Lanxess and Saudi Aramco are entering into a joint venture for synthetic rubber with an estimated value of €2.75 billion euros. 

The world’s largest producer of synthetic rubber and the world’s largest oil and energy producer entered the strategic alliance each holding a 50 percent interest, with Saudi Aramco paying approximately EUR 1.2 billion in cash for its share.

Lanxess will contribute its synthetic rubber business to the new joint venture. This will include the Tyre and 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.

Saudi Aramco will provide the joint venture with competitive and reliable access to strategic raw materials over the medium term. 

“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.”

The new joint venture, expected to be completed in the first half of 2016, 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 programme, which Zachert says will allow it “to return to growth considerably sooner than expected.”