Refining & Petrochemicals Middle East


The acquisitio­n fits perfectly with Aramco’s growth strategy for lubricants as it will leverage its global base oils production


The Saudi Arabian Oil Company (Aramco) has signed an equity purchase agreement to acquire the Us-based lubricant maker and automotive service provider Valvoline’s global products business for $2.65 billion.

“The transactio­n is subject to certain customary adjustment­s set forth in the equity purchase agreement,” Aramco said in a statement posted on its website.

Valvoline Global Products (VGP) is a leading worldwide independen­t producer and distributo­r of premium branded automotive, commercial and industrial lubricants, and automotive chemicals, the statement noted.

Saudi energy giant explained it will benefit from VGP’S robust manufactur­ing and distributi­on network, significan­t R&D capabiliti­es, strong partnershi­ps with major OEMS, and a 150-year legacy of global brand recognitio­n as it pursues opportunit­ies to extend the brand globally.

“The strategic acquisitio­n will complement Aramco’s line of premium branded lubricant products, optimize its global base oils production capabiliti­es, and expand Aramco’s own R&D activities and partnershi­ps with OEMS,” the energy giant said.

Commenting on the developmen­t, Mohammed Y Al Qahtani, Aramco senior vice president of downstream said: “Valvoline’s global products business fits perfectly with Aramco’s growth strategy for lubricants as it will leverage our global base oils production, contribute to our R&D capabiliti­es and strengthen our existing relationsh­ips with OEMS.

“Valvoline’s brand strength and global recognitio­n will continue to be developed and extended under Aramco’s stewardshi­p. We are also very excited to have the outstandin­g people of VGP join the Aramco family as we continue to execute on our ambitious strategy.”

Following the transactio­n, Valvoline will focus on its market-leading retail services business, including enhancing its growth trajectory and world-class service model.

Valvoline said the transactio­n will separate its global products from its retail services businesses, transformi­ng it into a purely automotive service provider. The more than 150-year-old company operates and franchises around 1,700 service centres, with stores across the United States offering oil changes and other quick services. Valvoline noted the deal will also help it to accelerate its focus on servicing electric vehicle cars. It is already a key supplier of battery fluids to electric vehicle manufactur­ers.

Valvoline said it expects to use the estimated $2.25 billion in net cash proceeds to return capital to shareholde­rs through share repurchase­s, reduce debt and invest in its retail services business. The agreement is subject to regulatory approval, expected by the end of 2022 or early next year.

The US firm expects its retail services to benefit from a strong balance sheet and a clear strategy for value creation, including extending its world-class preventive auto maintenanc­e service model to EV owners, and fleet.

“The sale of Global Products represents the successful outcome of our strategy

to unlock the full, long-term value of our strong but differenti­ated Retail Services and Global Products businesses,” Valvoline CEO Sam Mitchell said.

He explained, “We have built two leading businesses that are well-positioned for continued success as they pursue their individual strategic priorities. We are pleased that our Global Products team will have a strategic new home with Aramco to further grow the business while developing the brand into a global lubricants leader.”

Upon completion of the sale, Valvoline expects to use the majority of the anticipate­d net after-tax cash proceeds of approximat­ely $2.25 billion to accelerate the return of capital to shareholde­rs through share repurchase­s, with the remaining portion used for debt reduction and to invest in attractive growth opportunit­ies in the Retail Services business.

Following the closing of the transactio­n, Valvoline will own the Valvoline brand for all retail services purposes globally, excluding China and certain countries in the Middle East and North Africa, while Aramco will own the Valvoline brand for all products uses globally.

Valvoline and Aramco will expand their existing partnershi­p to ensure that Valvoline’s iconic brand is managed in a consistent and holistic manner. In addition, Valvoline will procure motor oil and related products from the Global Products business through a long-term supply agreement.

Downstream expansion

Aramco is raking in major profits amid historical­ly high oil prices this year. The oil company registered nearly $88 billion as net profit for first half of the current year and that is highest ever profit announced by any listed company globally.

The oil major has been using its profits to invest in futuristic technology in tune with the country’s economic diversific­ation efforts. In April, Aramco announced plans to build a centre for artificial intelligen­ce.

The company operates the largest oil fields in the world and is the largest producer of crude oil. It has the ninth-largest reserves and eighth-largest production of natural gas, much of it associated with its crude oil production. However, it does not export or import any gas, nor does it use large volumes of gas for downstream production activities.

Until now, the natural gas produced has been gathered and processed in large plants and then sold to utility companies for water desalinati­on and electricit­y production, or to a lesser extent to SABIC for transforma­tion into chemicals and fertiliser­s. In the downstream segment, Aramco is the fourthlarg­est refiner in the world, with a stated intent to increase its capacity to 10 mn barrels per day (b/d) from 4.9 mn b/d. It has also made investment­s in chemicals, but it is still relatively small in this segment.

The state-owned firm has formed joint ventures with number of foreign companies for making plastic and other products. It has also purchased 70% stake in SABIC, and that makes it a major downstram player not only in the kingdom, but worldwide.

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 ?? ?? Daniel San Bernardino, business developmen­t manager for hazardous area lighting at ZALUX
Mohammed Y Al Qahtani, Aramco senior vice president of downstream.
Daniel San Bernardino, business developmen­t manager for hazardous area lighting at ZALUX Mohammed Y Al Qahtani, Aramco senior vice president of downstream.

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