Independent lubricant manufacturer Warren Oil Co. has bought two blending and packaging plants from Shell Oil Products US. The plants are located in Johnstown, Pa., and Marion, Ill. The Marion facility was among seven that Shell decided to sell or close after its purchase of Pennzoil-Quaker State Co. last year.
Warren officials said the acquisition takes advantage of plant overlaps created when Shell acquired Pennzoil-Quaker State, and even earlier, by Pennzoils acquisition of Quaker State.
Clearly we are in a time when large companies have been downsizing and divesting parts of their business, President Irvin Warren said. This presents a great opportunity for us and certainly we should capitalize on it. Terms of the deal were not disclosed.
Shell officials were not available to say when or why the company decided to divest the Johnstown plant or to discuss the status of efforts to sell other facilities. In addition to the Marion plant, the company announced in October that it would sell two plants in Shreveport, La., and one each in Almeda and Vernon, Calif., Seattle and Bluefield, W.Va., or close them within one year. Irvin Warren said his company was already negotiating to buy the Johnstown and Marion plants when Shell acquired Pennzoil-Quaker State.
The Johnstown and Marion plants were closed last year, according to Warren, but Warren Oil rehired the plant managers and most of the former employees. Under Pennzoil-Quaker State, the plants packaged mainly in five-gallon pails and 55-gallon drums. Warren plans to add equipment lines for quart-sized containers.
After the Shell transaction, Warren Oil owns five blending and packaging plants. The company was formed in 1976 with one plant in Dunn, N.C., built a second in Benton, Ala., in 1985 and bought a plant in San Antonio, Texas, from Pennzoil-Quaker State in 2001. The company blends and markets generic automotive lubricants, largely to retailers such as grocery stores and convenience stores. Irvin Warren said the strategy has been a platform for growth for his company.
I think you find in pharmaceuticals and other industries that generic products are quite popular and the same is true for motor oils, he said. The privately held company employs 300 people and projects sales of $150 million in 2004.
In addition to allowing for further growth, Irvin Warren said the Johnstown and Marion plants will allow his company to reduce transportation costs for some accounts.
We already serve many customers in the Illinois, Indiana, Kentucky, Pennsylvania, Massachusetts and New York areas, [so we will be] reducing our freight expense immediately, he said. This is a game of geography. Everybody has freight costs, so its to your advantage if you can reduce yours.
Along with the plants, Warren acquired rights to several motor oil brand names, including Goldenstate, Goldband and Lubrigard. The latter is sold to distributors nationwide. Irvin Warren also noted that Pennzoil-Quaker State used the plants primarily to blend industrial lubricants and said that Warren will use them to expand into that segment.