Calumet Plucks Penreco for $240 Million


Calumet Specialty Products Partners on Monday announced an agreement to acquire Penreco, a major white oil supplier, from ConocoPhillips and M.E. Zukerman Specialty Oil Corp. The $240 million cash deal includes Penrecos manufacturing plants in Karns City, Pa., and Dickinson, Texas.

Calumet said it will enter into several long-term supply agreements with ConocoPhillips Co. at closing, which is expected in the fourth quarter of 2007, subject to conditions and regulatory approvals.

ConocoPhillips spokesman Bill Graham said the Penreco sale is part of an asset disposition program announced by ConocoPhillips last year. The business basically just doesnt fit into our long term goals and strategy, Graham told Lube Report.

Penreco and Calumet have worked together before. Calumet has been a supplier to Penreco off and on in the past, Jennifer Straumins, vice president of investor relations for Calumet Specialty Products Partners, told Lube Report. However, there have been no joint ventures or long term relationships between the two companies. She said the company was not prepared at this time to detail whether the acquisition will impact Penreco employees and locations. Upcoming Securities and Exchange Commission filings will provide more details on the acquisition agreement, she added.

Penreco is a partnership owned 50 percent by ConocoPhillips Co. and 50 percent by M.E. Zukerman Specialty Oil Corp. It is one of the United States three major white oil suppliers, along with Sonneborn and Citgo. In addition, Penreco manufactures and markets refrigeration oils, food-grade compressor lubricants, petrolatums, natural petroleum sulfonates, cable-filling compounds and gelled products. This acquisition will greatly expand our specialty products, Straumins said.

Calumet and Penreco have some overlap in products, with both companies manufacturing petrolatums for the cosmetics and pharmaceutical industries, refrigeration oils and a variety of solvents. Penreco produces highly refined, low-aromatic specialty hydrocarbon fluids by modifying its white mineral oil production process. Calumets solvent line consists of both hydrotreated and straight distillate solvents produced from domestic local crude.

Calumet President and Chief Executive Officer Bill Grube said the acquisition provides operational and marketing synergies with Calumets current business. We believe with this acquisition and our internal growth projects, we will continue to deliver stable and consistent growth to our unit holders, Grube said.

Penreco has distribution centers in Franklin Park, Ill.; Westlake, La.; Sulphur, La.; Karns City, Pa.; Dickinson, Texas; and Nederland, Texas. The company has offices in Dickinson, Franklin Park and Karns City, along with a research center in The Woodlands, Texas.

In 1973, Pennsylvania Refining Co. became the Penreco Division of Pennzoil Co. In the early 1970s, Penreco installed the worlds first hydrotreater designed to process petrolatums and white oils. In 1985, Penreco purchased Marathon Morco, a white oil and sulfonate producer in Dickinson, Texas. The acquisition included a line of specialty oils, refrigeration oils and compressor lubricants.

In 1997, Penreco became a partnership between Pennzoil-Quaker State Co. and Conoco Inc. Conoco contributed its Conosol and LVT brand solvent businesses to the partnership, while Pennzoil contributed Penreco and Magie Brothers, which supplied solvents.

In 2001, M.E. Zukerman Energy Investors Inc. purchased a 50 percent stake in Penreco from Pennzoil-Quaker State Co., while Conoco Inc. retained the remaining 50 percent stake. M.E. Zukerman Energy Investors was an affiliate of M.E. Zukerman and Co. Inc., a New York-based private merchant bank that co-invests with major energy companies in energy production, and in businesses in the midstream and downstream energy sectors. The affiliate later changed its name to M.E. Zukerman Specialty Oil Corp.

Related Topics

Market Topics