“Products included in this agreement augment an already extensive product portfolio offered under our CPI Fluid Engineering brand,” Michael Brubaker, vice president of Lubrizol fluid engineering, told Lube Report.

Brubaker added that the products in the deal will be manufactured in Lubrizol’s Midland, Michigan facility. The company’s CPI Fluid Engineering division there manufactures a variety of industrial and refrigeration lubricants.

BASF’s entire Emgard line includes polyalphaolefin and ester-based lubricants, and the entire Plurasafe line includes polyalkylene glycol formulations. The companies declined to specify the content of the particular products licensed to Lubrizol or the volumes in which those products are made.

“With Lubrizol, we have found the right company to license these industrial lubricant products, which address specific customer requirements,” BASF Vice President for Fuel and Lubricant Solutions Brian Lieberman said in a press release. BASF Fuel and Lubricant Solutions is part of the company’s Performance Chemicals division.

Though Lubrizol is already a giant in the lube additive space, such a deal can still prove to be worthwhile, according to Geeta Agashe, president of Geeta Agashe & Associates, LLC.

“Licensing generally involves allowing another company to use patents, trademarks, copyrights, designs, and other intellectual property in exchange for a percentage of revenue or a fee,” Agashe told Lube Report. “It’s a fast way to generate income and grow a business, as there is no manufacturing or sales involved.”

“Today, many products have very short life cycles and are readily replaced in the marketplace by new technology. If a company wants to survive and thrive, it needs to add new products to replace declining products continually,” she continued.

Companies can look to expand their product lines to cover excess manufacturing capacity, level out seasonal highs and lows or generate profit with an already proven product. “Companies may not have the internal skills, time or money to develop their own new products, so obtaining a proven product quickly through licensing may be very attractive.”

Agashe noted there are other reasons to enter a licensing agreement. Financially, it costs less than acquiring an entire company, you don’t pay for research and development, you don’t pay development costs upfront – rather you pay royalties from sales revenue – and you won’t incur losses if the products don’t sell well.

Other advantages include access to the experience and know-how of the company that developed the product and access to a new market with the new product but with the benefit of the experience gained in another market. “Lubrizol and BASF might have seen some of these benefits,” she concluded. The deal will go into effect April 1 of this year.