Warren Swallows Up Coastal


Fast-growing Warren Oil Co. last week completed its biggest acquisition yet, buying Coastal Unilube from El Paso Corp. for $34 million. The deal more than triples the size of Warren, likely making it one of the largest independent lubricant manufacturers in the United States.

Coastal Unilube, which is based in West Memphis, Ark., had sales of $213 million in 2003, according to Warren Oil President and Chief Executive Officer Irvin Warren. Warren Oil, of Dunn, N.C., had sales of $90 million.

Besides swelling the size of Warrens business, the transaction greatly increases the companys presence in the automotive aftermarket segment.

About 90 percent of their business is automotive aftermarket, Warren said, whereas were quite strong in convenience stores, mass merchandisers and food stores and only do about 10 percent of our business in automotive aftermarket. So this is not a merger of two companies that serve the same customers. Its really going to allow us to branch out.

Included in the sale is Coastals 116,000-square-foot blending and packaging plant, built after the companys old plant burned to the ground in 1998. Warren offered jobs to Coastals 199 employees and all but a few accepted, Irvin Warren said. Coastal President and Chief Operating Officer R. Kent Farmer has become president of Warren Unilube, which will operate as a separate company.

Irvin Warren said Warren Unilube will continue marketing the Unilube brand and will operate as Coastal did, but he added that he expects the acquisition to generate economies of scale.

As a small, independently owned company, we think we can bring some cost savings to this operation, Warren said. For one thing, we make our own containers and Coastal does not, so theres an opportunity for savings there. In addition, the two companies together will sell 80 million gallons of lubricants this year, so we will have increased purchasing power.

Coastal marks Warrens fifth acquisition since its founding in 1976 and the fourth plant that it has bought in less than four years. The company purchased a San Antonio plant from Pennzoil-Quaker State in 2000 and acquired two other former Pennzoil-Quaker State plants – in Johnstown, Pa. and in Marion, Ill. – from Shell Oil Co. last year.

Warren Oil now has six plants – the others are in Lexington, N.C., and Benton, Ala. – covering a combined 500,000 square feet and with 25 million gallons of storage capacity. Located on the Mississippi River, the West Memphis plant is the only facility able to receive base oil deliveries by water.

Irvin Warren acknowledged that his company took on significant debt to make the latest purchase but added that it is not necessarily through with acquisitions.

Were still a young company, and, if we see something that makes sense….

Coastal was one of three asset sales that El Paso announced last week, the others being a stake in a petroleum joint venture in the Philippines and rights to a Philippines terminal and pipeline. The Houston-based company recently restructured and has sold $3 billion in assets over the past year in an effort to reduce debt.

El Paso acquired Coastal Unilube when it merged with Coastal Corp. in 2001, but the lubricant business was never its priority. El Paso was most interested in Coastal Corp.s pipeline and power assets, although at least some of the latter are now up for sale.

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