Diversified container maker Greif Inc. purchased lubricant compounder and packager Delta Petroleum Co. last week from an investment firm. The transaction marries two companies that have been on acquisition bents in recent years. It also constitutes a rare venture by a packaging manufacturer into lube blending.
Delta was sold by Riverside Co., but neither it nor Greif disclosed terms of the deal. Greif, which is based in Delaware, Ohio, said it was attracted by the opportunity to enter the contract-packaging business and that its geographic reach should help Delta grow.
The synergies are meaningful, Greif Chairman and Chief Executive Officer Michael Gasser said. Delta expands Greifs value-added service offering for our customers, allowing [customers] to focus on their core businesses. At the same time, Greifs global footprint provides Delta a world platform for growth.
Greif (which rhymes with life) described Delta as the largest privately owned blender and packager of lubricants, chemicals, and glycol-based products in North America, with annual revenue of more than $182 million. (Warren Oil Co., of Dunn, N.C., appears to be the biggest privately owned lube blender on the continent, with revenue of approximately $350 million and blended lube volumes of approximately80 million gallons.) Delta, headquartered in St. Rose, La.,made two lube-industry acquisitions in recent years, buying Chicago lube blender Olympic Oil in 2001 and Toronto lube andchemical packager Vulsay Industries in 2004.
All Delta operations are included in the sale: Olympic Oil, Delta Rocky Mountain Petroleum, Delta Chemical Services, Delta Petroleum, Vulsay, and Delta Atlantic.The companyblends, packages, distributes and warehouses more than 200 million gallons of lubricants, chemicals and glycol-based products per year and has facilities in Houston, Bayonne, N.J., Denver, Chicago and Toronto.
Greif manufactures steel, plastic and fiber drums, corrugated cardboard and other paper packaging products, and claims to be the worlds leading provider of industrial packaging products and services. It also manages timber assets in North America and has annual revenues of $2.4 billion.
Greif Communications Director Deb Strohmaier explained the benefit that the company sees in linking with a lubricant and chemical compounder andpackager.
We have drum manufacturing expertise, and we have customers around the world that would like to make use of the packaging and filling services that Delta offers, she said. We see this as what we call an adjacency to our business. Weve been growing, and we want to continue that trend, but the packaging market is not growing that much now, except in emerging markets.
Strohmaier acknowledged that it is unusual for manufacturers of packaging material to enter the lube blending business.
I dont know of any other packaging companies that are doing that, she said. But we are a diversified company – probably the most diversified packager in the world. Most of our competitors focus on steel and do some plastic, or they concentrate on plastic and do some steel or paper products. We do all three, and we also make drum closures and have our timber business, so were not afraid to branch out.
Riverside, which has offices in Cleveland and several other cities but claims none as a headquarters, focuses its investments on companies valued between $10 million and $100 million. It acquired Delta in 1999. While not disclosing the price of the sale to Greif, it claimed that the deal provided a cash-on-cash return of 5.0 times. That means the difference between the sales price and initial investment was five times the initial investment.
Greif said Deltas various operations will retain their existing identities and that it plans no changes in management.