Valvoline Inc. has reached a definitive agreement with Aramco for the sale of Valvoline’s Global Products business for $2.65 billion in cash.
“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 creates 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 says it expects to use the majority of the anticipated net after-tax cash proceeds of approximately $2.25 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.
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 product uses globally. Valvoline and Aramco stated they will expand their existing partnership to ensure that the Valvoline 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. The transaction is targeted to close in late calendar year 2022 or early 2023.
Based on currently available information, the company expects Retail Services sales of approximately $1.5 billion in fiscal 2022, an increase of more than 20% from fiscal 2021.
Preliminary Financial Results for Q3 2022
Valvoline also reported the following preliminary financial results for the fiscal third quarter ending June 30, 2022:
Preliminary reported net income of $99 million and diluted EPS of $0.55
Preliminary adjusted EPS of $0.58 and adjusted EBITDA of $180 million
Preliminary revenue of $957 million
Preliminary Retail Services sales growth of 16% and system-wide same store sales (SSS) growth of 9.9% and an ending net system-wide store count of 1,690
Preliminary Global Products sales growth of 24% and volume growth of 9%
Advisors
Goldman Sachs & Co. LLC is serving as financial advisor and Cravath, Swaine & Moore LLP is serving as legal advisor to Valvoline.
