Aramco's acquisition of an additional 22.5 percent stake in Petro Rabigh for $702 million signifies a major strategic move in expanding its downstream operations. Here are the key points:
Increased Stake: This acquisition will boost Aramco’s stake in Petro Rabigh to approximately 60%, making it the majority shareholder. Sumitomo Chemical's stake will decrease to 15%.
Price and Financial Details: Aramco is purchasing the shares at SR7 ($1.86) per share. The total financial injection, including a matching $702 million investment by Aramco and a $750 million waiver of shareholder loans from both parties, amounts to $1.4 billion. This financial support aims to enhance Petro Rabigh’s balance sheet and liquidity.
Strategic Goals: This move is part of Aramco's broader strategy to strengthen its downstream value chain, secure its upstream crude oil placements, and convert hydrocarbons into high-value materials. The acquisition will also support Petro Rabigh’s turnaround strategy and improve its profitability.
Sumitomo Chemical’s Shift: Sumitomo Chemical is transitioning from commodity chemicals to specialty chemicals, aligning with its strategic goals by divesting its stake in Petro Rabigh.
Regulatory and Financial Adjustments: The transaction is contingent upon regulatory approvals and involves an agreement where Sumitomo’s proceeds from the sale will be reinvested into Petro Rabigh. Additionally, both companies will phase out $750 million each in shareholder loans, reducing Petro Rabigh’s liabilities by $1.5 billion.
Overall, this acquisition aligns with both Aramco’s and Sumitomo Chemical’s strategic directions, aiming to bolster Petro Rabigh’s financial health and operational efficiency.