Aramco acquires additional 22.5% stake in Petro Rabigh for $702 million

Aramco signed a definitive agreement to acquire an additional stake of approximately 22.5% in Rabigh Refining and Petrochemical Co. (Petro Rabigh), the refining and petrochemical complex located on Saudi Arabia’s west coast, from Sumitomo Chemical for US $702 million.

Aramco and Tokyo-headquartered Sumitomo Chemical currently each own 37.5% of shares in Petro Rabigh, which was listed on the Saudi Exchange in 2008. Upon completion of the transaction, which is priced at SAR7 ($1.86) per share, Aramco will become Petro Rabigh’s largest shareholder with an equity stake of approximately 60%, while Sumitomo Chemical will retain an equity stake of 15%. The transaction, which is subject to customary closing conditions including regulatory approvals and other third-party approvals, is part of a package of financial measures intended to reinforce Petro Rabigh’s financial position.

Hussain A. Al Qahtani, Senior Vice President of Fuels at Aramco, said in a press statement, “By increasing our shareholding, we expect to achieve even closer integration with Petro Rabigh and facilitate its turnaround strategy. We look forward to building on our existing relationship with Petro Rabigh, in alignment with our strategic goals.”

Under the terms of the share sale and purchase agreement, all proceeds received by Sumitomo Chemical from the sale will be injected into Petro Rabigh, through a mechanism to be agreed with Petro Rabigh. Aramco will also provide additional funds to Petro Rabigh, via a mechanism also to be agreed, matching the $702 million from Sumitomo Chemical to improve Petro Rabigh’s financial position and support Petro Rabigh’s future strategy, bringing the aggregate injection amount to $1.4 billion.

In addition, Aramco and Sumitomo Chemical have agreed to a phased waiver of shareholder loans of $750 million each, which will result in a $1.5 billion direct reduction in Petro Rabigh’s liabilities.

These measures are expected to improve Petro Rabigh’s balance sheet and cash liquidity as part of a remedial plan that Aramco and Sumitomo Chemical intend to explore with Petro Rabigh, which also includes initiatives to upgrade the refinery with the aim of helping improve the profitability of the business. The agreement also aligns with Aramco’s downstream expansion and Sumitomo Chemical’s move away from commodity chemicals toward specialty chemicals.

When commenting on the announcement, Seiji Takeuchi, Senior Managing Executive Officer at Sumitomo Chemical, said, “Amid the evolving business landscape in both the refining and petrochemical sectors, Aramco and Sumitomo Chemical have considered options to find an appropriate turnaround strategy for Petro Rabigh and identify an appropriate framework to facilitate Petro Rabigh’s future plans.

"We believe this transaction, which aligns with the strategic directions Aramco and Sumitomo Chemical are respectively pursuing, will significantly enhance Petro Rabigh’s financial position,” he added.