Here’s a deal that was nailed down under slippery circumstances, which is exactly how both parties wanted it.
Petroleum giant Saudi Aramco announced Monday that it has agreed to buy the lubricants business of Valvoline, the century-and-a-half-old purveyor of motor oils, transmission fluids, coolants and other slick automotive products, for the nontrivial price of $2.6 billion.
Grease is the Word
Saudi Aramco has the ‘go big or go home’ mentality down pat. It is the world’s biggest crude oil producer, pumping 10.5 million barrels a day or more than 10% of the world’s supply. It is the most valuable company on earth, having pushed Apple into runner-up status in May when crude prices started soaring. Its oil refinery in Port Arthur, Texas is the largest in the US, in keeping with the state’s everything is bigger creed.
Saudi Aramco, the oil company primarily owned by Saudi Arabia, has also begun placing greater emphasis on so-called downstream operations, or business further along the supply chain like refining and distribution. That’s why taking on Valvoline’s lubricants division, which made $1.7 billion in revenue last year, aligns with its core business plan:
- With Valvoline’s line of lubricants, coolants, and other automotive products, Aramco doubles down on an existing bet on petrochemicals, products derived from refining petroleum. Two years ago, it bought a 70% stake in petrochemicals manufacturer Saudi Basic Industries for $69 billion and, in January, it took a 30% stake in Polish refiner PKN Orlen.
- Kentucky’s Valvoline gets a buyer for a division it has been trying to offload since December and will continue operating its retail car maintenance unit, which made $1.2 billion in revenue last year, under the Valvoline name. The $2.25 billion in net cash proceeds Valvoline expects from the sale will go toward reducing debt, boosting shareholder dividends, and investing in the repair business. Valvoline operates and franchises some 1,700 service centers across the U.S.
Waiting on Wednesday: As for Aramco’s owner, all eyes will be on Saudi Arabia this week as OPEC+ producers decide on Wednesday whether to boost oil output, something US President Joe Biden requested during a high-profile diplomatic visit last month that saw him fist bumping the Kingdom’s controversial crown prince.