Speaking at Lube Day 2012 in Milan, Italy, in November, Apu Gosalia of Fuchs Petrolub AG looked at merger and acquisition trends in the lubricant industry. While chemical industry mergers and acquisitions plummeted in the first half of last year, lube industry activity was more robust, said Gosalia, Fuchs head of global strategic marketing and chief sustainability officer.
Even though strategic buyers have pressure to grow and substantial financial reserves in place, there is a high level of uncertainty perceived by senior management, said Gosalia, citing in particular the impact of the euro crisis on earnings expectations both for targeted companies and buyers.
There will still be deals, he said, but more on a mid-sized deal level.
Merger and acquisition activity could go on, Gosalia said, because:
Majors concentrate on big volume businesses and retract from niches;
Niche players suffering in the economic crisis become attractive targets;
Smaller players dont have the resources to cope with REACH, etc.;
New players enter the market and need to buy lube expertise; and
Deals on hold in the crisis move forward as soon as the economy improves.
Gosalia highlighted some 2012 examples, including Exxons sale of its Japanese lube business stake to Tonen;
Chevrons sale of lube businesses in Spain, Portugal and Gibraltar to Cepsa; Calumets purchase of Royal Purple and TruSouth; Cosans acquisition of Comma Oil from Exxon; and Houghtons sale to Gulf Oil.
It looks like were going to see some interesting M&A news in the year ahead.
– Nancy J. DeMarco
nancy@LNGpublishing.com