BP’s Castrol Unit Draws Interest From Reliance, Apollo and Lone Star
(Bloomberg) --
BP Plc’s Castrol lubricant business is attracting interest from energy companies including Reliance Industries Ltd. and buyout firms such as Apollo Global Management Inc. and Lone Star Funds, according to people with knowledge of the matter.
BP has sent out initial information to other potential bidders for the unit including investment firms Brookfield Asset Management Ltd. and Stonepeak Partners, the people said, asking not to be identified because discussions are private. The business could fetch between $8 billion and $10 billion in a deal, the people said.
Shares of BP were up 1.2% at 9:01 a.m. Thursday in London, giving the company a market value of about £58 billion ($78 billion).
The suitors would join the world’s biggest energy company, Saudi Aramco, in considering bids for all or part of the business. The process is still in the early stages, with initial bids expected in several weeks, so price and outcome remain open, the people said. Some suitors could team up as well.
Meanwhile, bankers are considering providing around $4 billion-equivalent of debt to back potential bids for the unit, according to people familiar with the matter. The financing is expected to be denominated in different currencies including euros and dollars to maximize liquidity, and will possibly be made up of leveraged loans and high yield bonds, they added. It is one of the few buyout financings expected to hit the market this year and is likely to garner attention from bankers looking and investors alike.
As part of a major corporate revamp, BP started a strategic review of the Castrol-branded business. Activist investor Elliott Investment Management has emerged as one of the company’s largest shareholders and has been pressing management to make bolder changes.
BP’s big strategy reset is already looking shaky due to lower oil prices. This could raise pressure on the company for successful asset sales.
The Castrol business includes lubricants for autos and industries, and it has been developing liquid cooling technology for artificial intelligence data centers. Its operations in fast-growing markets like India are particularly interesting to Reliance and Aramco, some of the people said. Its Mumbai-listed subsidiary Castrol India Ltd. has a market value of about $2.5 billion.
Representatives for BP, Apollo, Lone Star, Brookfield and Stonepeak declined to comment, while a representative for Reliance wasn’t immediately available for comment.
(Updates with BP share move in third paragraph.)
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