GP Buys Stake in Mag

GP Global has acquired a majority stake in United Arab Emirates based Mag Lube in a deal that values the company at close to U.S. $75 million, GP announced in an April 11 press statement. Formerly known as Gulf Petrochem Group, GP will gain access to Mag Lubes business in more than 40 countries spanning the Middle East, Africa and Asia.

GP did not reply to a question from Lube Report on the size of the stake, the value of the transaction or how it was structured.

The latest acquisition marks GPs transformation from an oils and fuels trader to a significant regional lubricant competitor.

Established in 2013, Mag Lubes operations include a 60,000 metric tons per year capacity fully automated, just-in-time batch blending facility located at National Industrial Park, Jebel Ali, U.A.E. Mag Lube employs 100 staff in the Middle East and Africa. Its lubricant range includes gasoline and diesel engine oils, industrial oils and automotive gear oils, as well as greases that are marketed through international distributors.

According to Mehrdad Vajedi, director of the U.A.E.-based manufacturer and trading company Permian Energy, the acquisition will help consolidate GPs business in key regional lubricant markets. Mag is not that active in the Middle East, and I do not see any significant change in [the] Middle East market; however, they have good penetration in East and West Africa - I think it will be a good move for GPG to get that market.

The U.A.E., home to more than 50 blenders, remains a highly competitive market and major hub for the export of finished lubricants. GP has set some ambitious targets following the acquisition and expects a five-fold increase in regional lubricant sales, which are forecast to reach 53,000 tons this year. It also aims to become one of the top U.A.E. lubricant manufacturers, contributing to a global production slate of about 220,000 tons by 2022.

Through our majority stake in Mag Lube we will be able to realize the kind of scale that would allow us to enjoy the benefits of the entire value chain. The groups combined output will now stand at 140,000 kiloliters [124,000 tons] per annum which includes GP Globals operations in India, Sudhir Goyel, the companys managing director, said in a statement. He expects the integration of Mag Lube to take three months, with Mag Lubess CEO, Mahmoud Al Theraawi, remaining in his position and continuing to lead the business in the U.A.E. Goyal also hints at further acquisitions, saying growth will be both organic and inorganic.

In the last few years the Sharjah, U.A.E.-based firm has used acquisitions to drive growth across its business portfolio, which includes refining, storage terminals, trading and bunkering, bitumen, lubricants, grease manufacturing, shipping and logistics. In 2014 Gulf Petrochem effectively gained full control of Sah Petroleum, a second-tier Indian lube supplier, after buying 72 percent of shares from the Sah family and 26 percent from stockholders in an open offer.

The following year Gulf Petrochem opened a 250,000 kiloliter (1.6 million barrel) storage terminal for base stocks and other fluids in Gujarat, India. At the time the company said about 10 percent of that storage capacity was allocated to base oils.

Mag Lube blending plant

Photo courtesy of Mag Lube