Equity Firm Buys Warren Distribution

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A Chicago private equity firm announced last week that it has agreed to acquire majority stakes in Warren Distribution Inc., one of the largest private label lubricant manufacturers in the United States, as well as Highline Aftermarket LLC, a distributor of automotive aftermarket products.

The transactions, which were conducted separately, will result in an unusual combination of a lubricant blender and an aftermarket parts distributor. The equity firm, Pritzker Private Capital, did not disclose the price for either deal.

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PPC officials said they expect the transactions to be completed in December, at which time the businesses will be combined. They did not disclose the name of the new company but said they expect it to be a powerhouse due to the sizes of Warren and Highline.

“As a leading supplier for the automotive aftermarket, the combined company will have tremendous opportunities for growth, both through organic initiatives and accretive acquisitions,” Head of Investing Michael Nelson said in an Oct. 6 news release.

Warren, which is based in Omaha, Nebraska, claims to be the largest private label lubricants manufacturer and automotive chemical distributor located in North America. It has capacity to make more than 140 million gallons of lube per year at blending plants in Guntersville, Alabama; Council Bluffs, Iowa; Houston; and Glen Dale, West Virginia.

The company is majority owned by CEO and Board Chairman Robert N. Schlott, grandson of James Schlott, who founded the company 98 years ago. Robert Schlott will remain a board advisor.

Pritzker said it expects the acquisitions to be completed in December, at which time it intends to combine Warren and Highline. It did not say what the new company will be named.

Highline is based in Memphis and is majority owned by the Sterling Group. Its CEO, Darcy Curran, will lead the combined business.

Highline offers a wide range of engine oils and other automotive aftermarket products to oil jobbers, distributors, retailers and quick-lube operators across the country. Among the lubricant brands that it carries are Shell, Mobil, Lucas, Chevron, LiquiMoly, Valvoline and WD-40. Most of the lubricants that Warren blends are produced on behalf of customers that market them under their own brands, but the company does sell two-cycle engine oil, motorcycle lubricants and marine products under its Mag1 brand.

Highline also owns Service Champ, which offers engine oils and a range of other products such as oil filters, windshield wipers, air filters and cleaning products to quick-lubes and other automotive lubricant installers across the country.

One lubricant industry analyst speculated that the merger of Warren and Highline could offer big brand customers of Warren an entry into the installer channel of the lubricant market. Walmart is a customer of Warren, which also states it blends lubricants for the largest online retailer, which is unnamed on the company’s website. Amazon is recognized as the world’s largest online retailer by revenue. In 2018 it launched its own brand of engine oils, which currently are sold mostly through its website.

“Could the bringing together of these two companies offer an entry point to the quick-lube space and other engine oil installed service providers for some of Warren’s larger private label customers seeking growth opportunities?” said George Morvey, industry manager for the energy practice at Kline & Co. consultancy.

PPC declined a reporter’s request to respond to that speculation.

Morvey said the purchase of Warren, along with other industry acquisitions in recent years, suggests that buyers view the lubricants market as an attractive opportunity for profits.

“Despite all the talk about electric vehicles and other supposedly looming disruptions that have drawn so much attention recently, this is still a strong market – at least in the U.S. – for passenger car motor oil, especially synthetics and 0Ws,” he said. “The [vehicle] parc is growing, sales of new and used vehicles are beginning to rebound, with quick lubes, franchised and independent workshops the service providers of choice for vehicle owners. Opportunities exist in the U.S., making it attractive for consolidation and acquisitions for the foreseeable future.”