WSJ News Exclusive | Aramco Approached Valvoline About Potential Takeover of One of Its Units

Valvoline makes engine and automotive products and operates and franchises oil-change service centers around the U.S. Valvoline said last October that it planned to separate its retail-services business from its global-products operation, which is best known for its lubricants.

The retail unit includes the service centers while the global-products unit sells motor oil, transmission fluid and antifreeze to retailers and commercial customers. The global-products unit accounted for roughly 60% of the company’s nearly $890 million in revenue in its latest quarter.

It couldn’t be learned how much Aramco could bid for the unit.

State-owned Saudi Arabian Oil Co., as Aramco is formally known, is the world’s most valuable oil company with a market value of well over $2 trillion. It set the record for the largest initial public offering in history when it raised $29.4 billion on the Tadawul, the Saudi stock exchange, in 2019.

Aramco is looking to develop opportunities in refining and petrochemicals, known in the industry as the downstream sector. The Saudi firm’s interest in Valvoline marks its latest move to expand its downstream business after dialing back diversification plans following the oil price crash in 2020 to refocus on its core business of pumping oil and natural gas, according to people familiar with the matter

Earlier this month, Saudi Aramco said its net income rose more than 80% to record highs in the first quarter of the year, a surge that shows how some of the world’s biggest state-owned energy producers are benefiting from a price boom accelerated by Russia’s war against Ukraine.

In recent months, Aramco bought a stake in a Polish refinery and said it would invest in a 300,000-barrel-a-day refining and petrochemicals complex in China.

Valvoline reported earlier this month that same-store sales in its roughly 1,600 retail locations rose 13% in the second fiscal quarter compared with a year ago, while sales in its global-products segment increased 29%. Its earnings per share were little changed. The company said it expects adjusted earnings before interest, taxes, depreciation and amortization of $675 million to $700 million in its current fiscal year.

The company traces its roots to 1866 when John Ellis discovered the lubricating effects of crude oil and founded the company that became Valvoline, according to its website. It became an independent publicly traded company when it was spun off from

Ashland Inc.

in 2016 and is based in Lexington, Ky.

The potential acquisition is the latest sign that recent market volatility hasn’t choked off deal making. Indeed, companies in relatively strong positions have in some cases been taking advantage of the dislocation to scoop up coveted targets either with stock or, if they are sufficiently flush with it, cash.

Write to Summer Said at [email protected] and Cara Lombardo at [email protected]