Valvoline announces plan to “separate” quick lube business
Correction: As per Sard Verbinnen & Co (SVC), a New York-based global strategic communications firm advising Valvoline, it is not correct to say Valvoline has “decided to spin off its quick lube business in North America.” It would be correct to say that Valvoline is pursuing a “separation” of its Retail Services and Global Products segments. The company will consider a range of options to complete the separation.
U.S.-based lubricant marketer Valvoline Inc. has decided to spin off its quick lube business in North America, which represents about a third of total sales, to speed up its continued transformation.
Valvoline operates the second largest quick lube service chain by number of stores in the United States, with Valvoline Instant Oil ChangeSM , and the third largest quick lube service chain in Canada, with the Valvoline Great Canadian Oil Change brand. Based on currently available information, Valvoline has a total of 1,595 system-wide stores. Its quick lube business segment experienced fourth quarter and full year system-wide same-store sales growth of 20% and 21%, respectively, compared to the same period a year ago, Valvoline says. Valvoline's quick lube business belongs to the Retail Services business segment.
"Following a comprehensive review of strategic alternatives by the Valvoline Board of Directors and executive management, we believe 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," said Stephen F. Kirk, chairman of the Board.
"Our confidence in separating these two strong businesses reflects the tremendous progress we have made in our strategic transformation. Retail Services now generate more than half of our adjusted EBITDA [earnings before interest, taxes, depreciation, and amortization] and is growing at an exceptional pace. The separation will allow Retail Services to continue its growth and focus on leveraging its world class service model. Global Products is a market leading, high cash generating business, which we believe will thrive well into the future with the opportunity to focus and allocate capital to its own strategic priorities," said Sam Mitchell, CEO.
Valvoline is working with its outside advisors on determining the best way to accomplish the separation. The company has engaged Goldman Sachs & Co. LLC as financial advisor and Cravath, Swaine & Moore LLP as legal advisor.
No timetable has been established yet as to when the spin off will be completed. Valvoline said it does not plan to disclose further developments unless and until its Board approves a specific transaction or action.
Valvoline will report full year fiscal 2021 financial results on November 3, 2021. Based on information currently available, the company expects to report sales of USD3 billion for fiscal year 2021, up 27% compared to the same period a year ago.
Quick lube business
The Retail Services segment services the passenger car and light truck quick lube market in the United States and Canada with a broad array of preventive maintenance services and capabilities performed through Valvoline's retail network of company-operated, independent franchise and Express Care stores that service vehicles with Valvoline products. With its strong brand awareness and a loyal, growing customer base, Valvoline believes the Retail Services business is well-positioned for continued exceptional growth and operational excellence. Based on currently available information, Valvoline expects to report Retail Services segment sales of USD1.2 billion for fiscal year 2021, up 38% from the same period a year ago.
Lubricants and other automotive products
With a presence in more than 140 countries and territories, Valvoline's Global Products segment sells lubricants and other automotive and engine maintenance products primarily to automotive retailers, installers and original equipment manufacturers (OEMs). The company said it has established itself as the world's No. 1 supplier of battery fluids to electric vehicle manufacturers, offering tailored products to help extend vehicle range and efficiency. Within the U.S., Valvoline is the number three branded motor oil in the Do-It-Yourself (DIY) market by volume. The business has low capital intensity and is differentiated from competition due to its leading brand, product quality, and strong distribution partnerships, according to Valvoline. Based on currently available information, the company expects to report Global Products segment sales of USD1.8 billion for fiscal year 2021, up 20% from the same period a year ago.