Aramco Boosts Petro Rabigh Stake To Become Largest Shareholder

Aramco has announced the signing of a definitive agreement to acquire an additional 22.5% stake in Rabigh Refining and Petrochemical Co. (Petro Rabigh) from Sumitomo Chemical for $702 million. This acquisition will increase Aramco's ownership in Petro Rabigh to approximately 60%, making it the largest shareholder.

Currently, Aramco and Sumitomo Chemical each hold 37.5% of shares in Petro Rabigh, which was listed on the Saudi Exchange in 2008. Following this transaction, Sumitomo Chemical will retain a 15% equity stake. The share price for this transaction is set at SAR7.

The deal is subject to customary closing conditions, including regulatory approvals and other third-party consents. The financial measures are aimed at strengthening Petro Rabigh's financial position. All proceeds from Sumitomo Chemical's sale will be reinvested into Petro Rabigh through an agreed mechanism.

Aramco will match the $702 million from Sumitomo Chemical with additional funds, bringing the total injection amount to $1.4 billion. This financial support aims to bolster Petro Rabigh's financial health and support its future strategy.

Moreover, Aramco and Sumitomo Chemical have agreed to a phased waiver of shareholder loans worth $750 million each. This will result in a direct reduction of $1.5 billion in Petro Rabigh's liabilities, improving its balance sheet and cash liquidity.

Strategic Alignment and Future Plans

The agreement aligns with Aramco's downstream expansion strategy and Sumitomo Chemical's shift towards specialty chemicals from commodity chemicals. Aramco Senior Vice President of Fuels Hussain Al Qahtani stated: "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."

Sumitomo Chemical Senior Managing Executive Officer Seiji Takeuchi noted that the evolving business landscape necessitates finding an appropriate turnaround strategy for Petro Rabigh. He added that this transaction would significantly enhance Petro Rabigh's financial position.

The measures are part of a broader remedial plan that includes initiatives to upgrade the refinery, aiming to improve profitability. These efforts are expected to facilitate closer integration between Aramco and Petro Rabigh, aiding in the latter’s turnaround strategy.

This strategic move by Aramco is designed to reinforce its downstream value chain while supporting Petro Rabigh’s long-term goals and financial stability.

With inputs from SPA