British oil giant BP has announced the sale of a majority stake in its lubricant brand Castrol for approximately $10.1 billion. This significant transaction involves the transfer of a 65 percent stake to the American investment firm Stonepeak and is expected to close in 2024, pending regulatory approvals.
This move marks a pivotal transition for Castrol, a brand with a rich history spanning 126 years and recognized as one of the largest lubricant companies globally. The decision comes after BP undertook a strategic review of its Castrol division, attracting interest from various potential buyers, including major players like Reliance Industries and Saudi Aramco.
The choice of Stonepeak, which is headquartered in New York City and manages around $80 billion in assets, highlights the growing interest in the lubricant sector, particularly due to Castrol’s extensive manufacturing and distribution capabilities. Notably, Castrol operates around 20 blending plants and more than 100 third-party facilities across 150 countries.
As part of the agreement, the Canada Pension Plan Investment Board will support the deal with up to $1.05 billion, providing it with an indirect stake in Castrol. BP anticipates net proceeds of approximately $6 billion from this sale, which includes a pre-payment of future dividends on the remaining 35 percent stake BP will retain for at least two years.
Following the transaction, BP will have the option to sell its remaining interest in Castrol, though the company’s future plans regarding this stake remain uncertain. The oil giant has stated that all proceeds from the sale will be allocated to debt reduction.
Carol Howle, BP’s interim CEO, expressed optimism about the transaction, saying, “We concluded a thorough strategic review of Castrol, which generated extensive interest and resulted in the sale of a majority interest to Stonepeak. The transaction allows us to realize value for our shareholders, generating significant proceeds while continuing to benefit from Castrol’s strong growth momentum.”
Similarly, Anthony Borreca, Co-Head of Energy at Stonepeak, praised Castrol’s legacy and market position. He noted, “Castrol’s 126-year heritage has created a leading market position, an iconic brand, and a portfolio of differentiated products that deliver meaningful value to its customers. We are excited to work alongside Castrol’s talented employees, coupled with BP’s continued guidance as a minority interest holder, as we support the business’s continued growth.”
This transaction not only reshapes the ownership structure of a historic brand but also highlights the increasing investment interest in the lubricant market, which is critical for various industries worldwide. As the deal progresses towards closure, stakeholders will be closely monitoring its impact on both BP and Castrol’s future operations.
