The German specialty chemicals industry major Lanxess has recently announced that it is selling its 50% stake in a synthetic-rubber manufacturing company Arlanxeo to its JV partner Saudi Aramco. Reportedly, the two companies that founded the 50:50 synthetic rubber joint venture in 2016 have officially signed the agreement for the sale of the shares.

According to the sources familiar with the details of the transaction, Lanxess sold its 50% stake for over 1.4 billion euros (around USD 1.6 billion) in cash after including the debt and other financial liabilities.

If industry experts are to be believed, the deal marks an early departure for Lanxess from being the world’s leading provider of synthetic rubber that was chiefly used in tire applications. The Saudi state oil tycoon, plays a key role in Saudi’s Crown Prince’s ambition to diversify its economy beyond the oil & gas sector. The deal is further expected to accelerate the growth in the kingdom by leveraging Saudi Aramco’s strong feedstock position.

According to Financial Times, following the announcement Lanxess shares climbed more than 4% in the recent trading listings.

Abdulaziz Al Judaimi, Aramco’s Senior Vice President of Downstream, was reportedly quoted stating that the purchase of stocks underpins the company’s strategy to diversify its downstream portfolio, while also strengthening its capabilities across the entire chemicals and petroleum value chain.

For the record, Aramco is actively planning to boost its investment in petrochemicals & refining to secure new markets and expects the growth in the chemical sector to cut down the growing risk of a downturn in oil demand.

As per trusted sources, Lanxess in its earlier announcement has disclosed that it would keep the remaining 50% of Arlanxeo stakes until at least 2021.

Lanxess announced that the sale is still subject to regulatory approvals and the completion is projected to take place by the year end.