Saudi Group Eyes Stake Sale In Petromin After Partner Buyout

Saudi Arabia’s Dabbagh Group is planning to sell a 19 per cent stake in its lubricants business Petromin ahead of a potential public offering of the unit in 2015, banking sources aware of the matter said on Monday.

Proceeds from the stake sale will be used by family-owned Dabbagh Group to repay debt used to buy out its Indian partner earlier this year, three of the sources said, speaking on condition of anonymity as the matter is not public.

Dabbagh Group, which has interests in food, real estate and automobile services among others, owns all of Jeddah-based Petromin after buying out a 49 per cent stake held by India’s Hinduja Group in May this year following strategy differences between the two partners.

Petromin, the oldest lubricants company in the Middle East and formed by royal decree in 1968, makes more than 150 lubricant products and exports to more than 35 countries in the Middle East, Africa and Asia, according to its website.

“There is financing tied to this asset and they are looking to take it out by selling a minority stake,” one of the banking sources said. “Both local and regional buyers may been keen to participate as Petromin is a profitable business.”

The company has hired Saudi Fransi Capital, the investment banking arm of Banque Saudi Fransi, to arrange the stake sale, two of the sources said.

Jeddah-based Dabbagh may consider selling a further 30 per cent of Petromin to the public through a bourse listing in the first half of 2015, which would leave Dabbagh with a 51 per cent stake, the two sources said.

A spokesman for Dabbagh Group did not return an email seeking comment. Petromin and Saudi Fransi Capital were not available for comment.

The buyout from Hinduja Group had valued Petromin at around $700 million, the three sources said.

The 19 per cent stake is being offered to a small group of Saudi and Gulf-based investors and one or more party could end up holding some of the company following the process, the second banking source said.

Dabbagh Group and Gulf Oil International Group, a Hinduja unit, had paid $200 million to buy Petromin in 2007 from a joint venture between Saudi Aramco and Mobil Investments, an ExxonMobil affiliate.

Hinduja said in 2010 that Petromin had production capacity of 300,000 metric tonnes of lubricants and greases combined.