Valvoline signs purchase agreement with Saudi Aramco
After months of speculation, Valvoline Inc. announced on August 1 that it has reached a definitive agreement with Saudi Aramco for the sale of Valvoline’s Global Products business for USD2.65 billion in cash.
After the transaction closes, which is expected in late 2022 or early 2023, Valvoline, operating solely as a retail services business, will be led by Sam Mitchell, CEO, and Lori Flees, president.
“The sale of Global Products will represent the successful outcome of our strategy to unlock the full, long-term value of our strong but differentiated Retail Services and Global Products businesses,” said Sam Mitchell, Valvoline CEO. “We have built two leading businesses that are well-positioned for continued success as they pursue their individual strategic priorities.
“After closing, we will focus on our market leading Retail Services business, including further enhancing our growth trajectory and world-class service model. Retail Services will benefit from a strong balance sheet and a clear strategy for value creation, including extending our world-class preventive auto maintenance service model to EV owners, OEMs and fleets as the car parc evolves.
“We are pleased that our Global Products team will have a strategic new home with Aramco to further invest and grow the business while developing the brand into a global lubricants leader. The partnership between the world’s leading energy producer and one of the world’s most trusted global lubricant brands create a powerful combination that delivers meaningful benefits to employees, customers — including the Retail Services business — suppliers and investors.”
“Valvoline’s Global Products business fits perfectly with Aramco’s growth strategy for lubricants as it will leverage our global base oils production, contribute to our R&D capabilities and strengthen our existing relationships with OEMs. Valvoline’s brand strength and global recognition will continue to be developed and extended under Aramco’s stewardship. We are also very excited to have the outstanding people of Valvoline’s Global Products join the Aramco family as we continue to execute on our ambitious strategy,” said Mohammed Y. Qahtani, senior vice president of Downstream at Aramco.
Upon completion of the sale, Valvoline expects to use the majority of the anticipated net after-tax cash proceeds of approximately USD2.25 billion to accelerate the return of capital to shareholders through share repurchases, with the remaining portion used for debt reduction and to invest in attractive growth opportunities in the Retail Services business.
Based on currently available information, the company expects Retail Services sales of approximately USD1.5 billion in fiscal year 2022, an increase of more than 20% from fiscal year 2021.
Following the closing of the transaction, Valvoline will own the Valvoline brand for all retail services purposes globally, excluding China and certain countries in the Middle East and North Africa, while Aramco will own the Valvoline brand for all products uses globally.
Valvoline and Aramco will expand their existing partnership to ensure that Valvoline’s iconic brand is managed in a consistent and holistic manner. In addition, Valvoline will procure motor oil and related products from the Global Products business through a long-term supply agreement.
Completion of the transaction is subject to customary closing conditions and regulatory approvals. Goldman Sachs & Co. LLC is serving as financial advisor and Cravath, Swaine & Moore LLP is serving as legal advisor to Valvoline.