Lanxess sells 50% in rubber business to Saudi Aramco

Lanxess agreed on Tuesday to sell a 50 per cent stake in its synthetic-rubber business to Saudi Aramco, partnering with a supplier of petrochemical raw materials.

The deal values the joint venture that the two companies will set up at 2.75bn euros ($3.08bn) and operational control will be assumed by Lanxess, the German group said in a statement on Tuesday.

Saudi Aramco will buy the stake for around 1.2bn euros in cash, adjusted for debt and payables.

Lanxess Chief Executive Matthias Zachert has said the group could partner with a supplier of the petrochemical butadiene, the main raw material for synthetic rubber, to be less exposed to swings in that market.

Sources have told Reuters the group also held talks with European petrochemicals group Ineos, Russia’s NKNK and Sibur.

The search for a strategic partner for the German group’s synthetic rubber business, the world’s largest with about 3bn euros in sales, began more than a year ago as the company sought to combat oversupply in the industry.

Analyst Markus Mayer at Baader Bank said Lanxess stood to fetch about 10 per cent more than what the business was worth based on his sum-of-the-parts analysis.

The 2.75bn euros including debt that the entire rubber business is valued at by the deal amounts to 7.3 times estimated 2015 earnings before interest, taxes, depreciation and amortisation (EBITDA), above the multiple that Lanxess was trading at, Mayer added.