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Saudi Aramco Spent 24.6 Billion Yuan on Acquiring a 10% Stake in Rongsheng Petrochemical

On March 27th, Rongsheng Petrochemical reached strategic cooperation with Saudi Aramco, one of the world's leading integrated energy and chemical companies, and signed several agreements, including Saudi Aramco acquisition agreement to acquire 10% of Rongsheng Petrochemical for RMB 24.6 billion, as well as business cooperation framework agreements on raw materials, refined oil, chemical products, crude oil storage, and technology sharing.

Through this strategic agreement, Aramco Overseas Corporation ("AOC"), a wholly-owned subsidiary of Saudi Aramco, will acquire a portion of Rongsheng Petrochemical's shares. At the same time, Rongsheng Petrochemical and its subsidiaries will carry out all-around consultation and cooperation with Saudi Aramco and Aramco Trading Singapore ("ATS") in the fields of raw materials, refined oil, chemical products, crude oil storage, and technology-sharing. Based on a signed long-term sales agreement, Saudi Aramco will supply 480000 barrels of Arabian crude oil daily to Rongsheng Petrochemical's Zhejiang Petrochemical Co., Ltd. ("ZPC").

Rongsheng Petrochemical closed at 11.98 yuan per share last Friday (March 24). In other words, if calculated according to the closing price before signing the agreement, the premium for this equity transfer is as high as 103%.

This equity transfer will not lead to changes in the controlling shareholder and actual controller of Rongsheng Petrochemical; after the transfer is completed, the shares of Rongsheng Petrochemical held by Rongsheng Holdings will drop from the original 61.46% to 51.46%.

In 2022, Saudi Aramco's operating income was US$305.1 billion, its net profit was US$161.1 billion, and its net assets were US$444.3 billion. Saudi Aramco was listed on the Saudi Stock Exchange in 2019. In May 2022, rising oil prices pushed Saudi Aramco's stock price to a record high, and its market value once surpassed that of Apple. As of March 23, 2023, the market capitalization of Saudi Aramco was approximately SAR 7.07 trillion (equivalent to approximately US$ 1.88 trillion).

Rongsheng Petrochemical operates the world's largest monomer refinery Zhejiang Petrochemical 40 million tons refining and chemical integration project. It is an important producer of polyester, new energy materials, engineering plastics, and high-value-added polyolefins in China and Asia. It is the world's largest producer of PTA, PX, and other chemical products; the production capacity of polyethylene, polypropylene, PET, EVA, ABS, and other products ranks among the top in the world.

It is reported that the main raw material of Rongsheng Petrochemical is crude oil, which needs a stable supply. To meet the production demand for products, the company must import a large amount of crude oil and other raw materials from international crude oil suppliers, including Saudi Aramco, every year, but the relevant procurement contracts are relatively short. The time limit is the main factor, after which a new procurement contract needs to be renewed.

Rongsheng Petrochemical stated that through the signing of the above agreement, Rongsheng Petrochemical and its subsidiaries would further consolidate the cooperation relationship with Saudi Aramco's existing crude oil procurement business and obtain a long-term and stable supply of 480,000 barrels of crude oil per day, as well as the supply of other chemical raw materials, and is expected to further expand the overseas sales channels of chemical products to ensure the stability of the petrochemical industry chain.

At the same time, Saudi Aramco will lock in a large amount of crude oil procurement demand from Rongsheng Petrochemical and its subsidiaries and further expand its layout in China's chemical industry.

In addition, Rongsheng Petrochemical also stated that by signing a strategic cooperation agreement and a series of technical cooperation agreements, the two parties are expected to further strengthen the daily communication, technology research and development, and business cooperation and promote the realization of their respective strategic goals and long-term development.


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