Saudi Joint-Venture

Lanxess Sells Half of Rubber Business

Lanxess - Matthias Zachert
Lanxess chief executive Matthias Zachert found a partner for its synthetic rubber business.
  • Why it matters

    Why it matters

    Selling part of its synthetic rubber business will make Lanxess’s earnings less volatile and free up money for investments.

  • Facts

    Facts

    • In 2014, Lanxess had a net profit of €47 million, or $53 million, on sales of €8 billion, compared with a net loss of €159 million in 2013.
    • Lanxess’ synthetic rubber production operates in an industry with extreme overcapacity.
    • Saudi Arabia owns Saudi Aramco, which says it is the world’s largest exporter of crude oil and natural gas.
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    Audio

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Lanxess, one of Germany’s biggest chemicals firms, said Tuesday it will sell half of its synthetic rubber business for €1.2 billion, or $1.3 billion, to the Saudi Arabian state-controlled oil company, Saudi Aramco.

Cologne-based Lanxess has struggled with overcapacitiy in the global rubber market and pricing pressure in the market for its synthetic rubber products. Profitability of the synthetic rubber operations has been volatile.

Shares of Lanxess rose on the Frankfurt Stock Exchange. Shares at 12:54 local time were up 2.3 percent at a one month high of €46.87.

Lanxess and Saudi Aramco said they will form a joint venture, valued at €2.75 billion, to manage Lanxess’s synthetic rubber operations, which the Saudi firm will supply with raw materials from its petroleum derivatives business, Lanxess said.

“The joint venture brings together the world’s largest producer of synthetic rubber and the world’s largest oil and energy producer to form a far-reaching strategic partnership,” Lanxess said in the statement.

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