Saudi Aramco Buys Valvoline’s Fuels Unit for $2.7 Billion
- Aramco will use transaction to bolster downstream operations
- Goldman Sachs advised Valvoline on the all-cash takeover
Saudi Aramco will buy Valvoline Inc.’s petroleum business for $2.65 billion to expand its global refining and petrochemical operations.
The Saudi Arabian state oil giant will purchase the Global Products unit, which produces lubricants and chemicals for vehicles, with cash, according to a statement from Valvoline.
The business “fits perfectly with Aramco’s growth strategy for lubricants,” said the Saudi firm’s head of downstream operations, Mohammed Al Qahtani.
Aramco is investing heavily in its downstream unit as a way of diversifying from sales of crude oil. The division, which makes transport fuels such as gasoline and diesel and includes refineries in Asia and the US, generated $10.2 billion in first-quarter earnings before interest and taxes.
That was up from $4.4 billion a year earlier, though it’s still dwarfed by Aramco’s upstream business, which made pre-tax earnings of $70 billion.
In January, Aramco purchased a stake in a 211,000 barrels-a-day refinery in Poland for roughly $255 million.
Valvoline, based in Lexington, Kentucky, will use about $2.25 billion from the transaction to return money to shareholders, reduce debt and invest in its retail services. It will become a “pure-play automotive service provider” and target earnings-per-share growth of more than 20%.
Its stock rose 1.8% to $32.81 by 9:33 a.m. in New York, paring this year’s loss to 12%.