Aramco Eyes Valvoline Unit

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Saudi Aramco, the world’s largest oil company, has approached Valvoline, one of the world’s largest independent lubricant suppliers, about buying part of its business, according to a report by the Wall Street Journal.

The May 25 article, which cited unidentified individuals familiar with the contact, said Aramco expressed interest in Valvoline’s international lubricants and automotive care products business, which Valvoline is separating from its network of oil change centers.

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Valvoline, which is based in Lexington, Kentucky, United States, announced last year that it would separate the businesses, though it did not go into detail about exactly how it would do that. The company has since created two business units and begun to report separate financial results for each, but apparently the restructuring is not complete.

The company declined to confirm or deny whether it was contacted by Aramco or if the companies are negotiating.

“Valvoline continues to work on its previously announced separation process with the goal of maximizing shareholder value and setting both businesses up for long-term success,” said a representative who asked not to be named. “There is a rigorous process in place to determine the optimal path, but no decisions have been made, and we have no additional comment at this time.”

Saudi Arabian Oil Co., Aramco’s formal name, is a state-owned vertically integrated oil producer and refiner. It is more than 10 times larger than any other energy company, whether measured by revenue, income or market capitalization.

In recent years it has set a strategy to shift resources to higher value-added parts of the industry, including chemicals refining. It has also become one of the world’s largest base oil players, buying Motiva and one of the world’s largest base oil plants on United States Gulf Coast, and acquiring a majority stake in S-Oil, which operates the largest base oil plant in Onsan, South Korea. It has long had a majority stake in Luberef, a refining joint venture that owns two base oil plants in Saudi Aramco.

Aramco has a lower profile in the finished lubricant market. Last year it re-entered the market by launching the Orizon brand of lubes in Saudi Arabia. Until then it had been out of the market since selling its stake in the Petromin joint venture in 2007. S-Oil sells finished lubes but is a much smaller player in that market than base oils.

Valvoline is one of the world’s largest lubricant suppliers that is not also an oil refiner. For its 2021 fiscal year it reported net income of $420 million on sales of $3 billion. The global products unit had net income of $298 million on sales of $1.8 billion.