Saudi oil giant Aramco (2222) has decided to acquire an additional stake in Rabigh Refining and Petrochemical Co. (Petro Rabigh) (2380) for USD 702 million.
Aramco is eying the snap of an additional 22.5% of the shares held by Japanese chemical company, “Sumitomo Chemical.”
Major Deal
Aramco and Sumitomo Chemical together own approximately 37.5% of Petro Rabigh’s listed on Tadawul since 2008.
Upon completing the deal, which is priced at SAR 7 per share, “Aramco” will become the largest shareholder in “Petro Rabigh,” with a stake of about 60% in the latter.
Meanwhile, Sumitomo Chemical’s ownership will stand at a 15% share.
So what
The terms of the share purchase agreement require Sumitomo Chemical to reinvest all the proceeds from the deal into Petro Rabigh.
Aramco will also invest a similar amount to support Petro Rabigh’s future strategy.
The total amount being injected will reach USD 1.4 billion.
The two companies have also agreed to gradually relieve Petro Rabigh of its shareholder loans, which total USD 750 million each. This will lead to a direct reduction of USD 1.5 billion in Petro Rabigh’s liabilities.
Some context
News of the acquisition agreement drove Petro Rabigh’s shares up 10%, reaching SAR 8.14 on the market close Wednesday.
This is the largest rise in the company’s share value since December 2021, reducing its losses this year to 22%.
Petro Rabigh has reported a second-quarter loss of SR1.1 billion ($293 million).
Now what
The acquisition deal, subject to regulatory approvals, is expected to improve Petro Rabigh’s cash liquidity and financial position.
It is part of a course correction strategy that “Aramco and Sumitomo Chemical intend to discuss further, which includes initiatives aimed at enhancing the refinery to help improve financial performance.
This agreement also aligns with Aramco’s efforts to expand in the refining, chemicals, and marketing sectors, as well as Sumitomo Chemical’s shift towards specialty chemicals instead of commodity chemicals.
