Saudi Aramco is rumored to be potential buyer of Valvoline

Valvoline Inc., which recently announced the purchase of the outstanding 50% stake in its VCA Solutions joint venture, is reportedly in early talks with Saudi Aramco. A potential acquisition by Saudi Aramco, which recently surpassed Apple as the world’s most valuable company, fits into the Saudi Arabian Oil Company’s strategy to expand its downstream presence. Aramco already owns stakes in three base oil refining companies—Motiva in the United States, Luberef in Saudi Arabia and S-Oil in South Korea. Last December, the company entered the finished lubricants market with the launch of its own Orizon brand in Saudi Arabia. However, the global finished lubricants market is crowded and having a global brand like Valvoline would give Aramco a huge boost. Aramco also has deep pockets, and it could easily afford to buy all of Valvoline, which has a market capitalization of USD5.29 billion.

Last October, the company which is based in Lexington, Kentucky, U.S.A., announced plans to pursue a “separation” of its Retail Services and Global Products segments. The company said at that time that it will consider a range of options to complete the separation.

Valvoline Chairman Stephen Kirk, who is retiring from the Board next month, said at that time that “a separation of our business segments will create significant and sustainable value for our shareholders, employees and other stakeholders, and will best position the Retail Services and Global Products businesses for continued long-term success.”

Retail Services business segment

In April, Valvoline announced the appointment of Lori Flees as the president of its Retail Services business segment, reporting directly to CEO Sam Mitchell.  Valvoline Retail Services includes more than 1,600 locations across the U.S. and Canada with a team of nearly 9,000 employees. Valvoline operates the second largest quick lube service chain by number of stores in the United States, with Valvoline Instant Oil Change^SM , and the third largest quick lube service chain in Canada, with the Valvoline Great Canadian Oil Change brand.

According to Valvoline’s 2021 Annual Report, “one of the biggest milestones in our transformation this year was achieved when our Retail Services segment (formerly known as Quick Lubes) represented more than half of total segment profitability for the first time. This was an important juncture in our shift to becoming a more service-focused company.” 

Retail Services also surpassed USD1 billion in total sales for the first time in the fiscal year, the annual report said, posting a record USD1.221 billion, up 38% from 2020. 

Global Products business segment

Valvoline’s Global Products business segment sells lubricants and other automotive and engine maintenance products primarily to automotive retailers, installers and original equipment manufacturers (OEMs) in more than 140 countries and territories. The segment is a combination of its former Core North America and International business segments.  Within the U.S., Valvoline is the number three branded motor oil in the Do-It-Yourself (DIY) market by volume. During the fiscal year, the company said it sold 115 million gallons outside North America, including affiliates and joint ventures. Global Products segment sales in fiscal year 2021 was USD1.76 billion, up 20% from 2020.

For the fiscal year ended September 30, 2021, Valvoline reported USD2.981 billion in annual sales, up 27%, and net income of USD420 million, an increase of 32%, from 2020.

Why Valvoline acquired the remaining stake of VCA Solutions

VCA Solutions is a distributor of top-tier automotive batteries and battery testing equipment. The purchase was finalized, effective May 1, 2022. By acquiring VCA Solutions, Valvoline is uniquely positioned to help Valvoline Instant Oil Change^SM (VIOC) locations, Valvoline Express Care™ stores, and installers meet the needs of consumers who come to automotive service centers for preventive maintenance services beyond a traditional oil change. Today, nearly all of the 290 million vehicles on U.S. roads have lead-acid batteries. 

“Batteries play a critical role in vehicle reliability both in vehicles today and in the future,” said Jamal Muashsher, president, Global Products. “Automotive installers, including VIOC service centers, have a continuous need to service consumers’ vehicles beyond oil changes. The acquisition of VCA Solutions adds to our robust offering of preventive maintenance products and solutions designed to meet our customers’ needs.”

VCA Solutions was created in 2019 through an exclusive partnership between Valvoline and Club Assist, a leading global supplier of automotive lead-acid and AGM batteries. Today, nearly 1,300 VIOC company-operated and franchise-owned service center locations use VCA for their battery solutions. Prior to the acquisition, Valvoline had 50% ownership of VCA. Moving forward, it will oversee full strategic direction and operations.

“VCA Solutions will continue to support and grow the superior standard of Valvoline products and offerings,” said Chris Eckert, general manager, head of VCA Business. “We will operate at the same high-level of service as we did before. The VCA Solutions team is thrilled to fully join Valvoline, a business that is aligned with the quality-focused culture we pride ourselves on.”

The acquisition enables new efficiencies and automotive solutions for installers, Valvoline Retail Services company-owned, franchise-owned and independently operated service centers, while growing the product portfolio for hybrid and electric vehicles in the future. Further, Valvoline customers will now have expanded access to top-tier vehicle maintenance services, including battery purchase, maintenance, and testing.

“VCA has delivered added customer value and business expansion with their high-touch battery solution for the Valvoline service center ecosystem,” said Muashsher. “With this business as part of our offering, it enables us to service more customers now and into the electrified future.”