BP weighs potential sale of Castrol Lubricants unit amid Elliott push

By Dinesh Nair, Ruth David, Mitchell Ferman and Aaron Kirchfeld 

BP Plc, in which activist investor Elliott Investment Management has built up a nearly 5 per cent stake, is considering a potential sale of its lubricants business, according to people familiar with the matter.  

The oil major’s unit, which operates under the Castrol brand, could be worth about $10 billion in a deal, the people said, asking not to be identified as the matter is private. A sale of the business is one of the many options BP is considering to win back investor confidence after years of under performance, the people said. The unit is also among the assets that Elliott has identified for potential disposals, the people said. 

 

BP might announce the potential divestment during its capital markets day on Feb 26, they said. Deliberations on the potential disposal are ongoing and no final decisions have been made, the people said. 

Representatives for BP and Elliott declined to comment. 

The Castrol brand serves customers in more than 150 countries in the automotive, marine, industrial, aerospace and energy production sectors, according to BP’s website. Recently, the brand has expanded into developing liquid cooling technology to help with the issue of overheating at data centers. Castrol is also a widely recognized brand in global sport through marketing partnerships with the NBA, WNBA and motorsports. 

Elliott, which has built up a stake worth about £3.7 billion ($4.7 billion) in BP, is demanding that it make drastic cost cuts and divestments to strengthen its future as a standalone company, Bloomberg News reported last week. Elliott wants BP to reshape its business to be more like other oil majors such as Shell Plc by cutting spending in areas such as renewable energy, as well as making sizable non-core asset divestments. 

BP’s lubricants business could be worth about $8 billion to $10 billion based on an earnings before interest, tax, depreciation and amortization of $1 billion, analysts at RBC Capital wrote in a research note to clients on Feb. 9. Elliott’s “more aggressive” approach could be pushing BP for a sale or spinoff of other businesses such as US shale and fuel marketing, the analysts said. 

There are several other parts of BP that have been identified by analysts for potential asset sales, mostly in clean energy. This is a process that has already partially begun with the spin-off of BP’s offshore wind business into a joint venture. Chief Executive Officer Murray Auchincloss is also working to offload onshore wind assets. 

The company is looking for a partner in Lightsource BP, a solar energy and battery storage unit. It also has an electric vehicle charging unit that made a big expansion in the US under Auchincloss’s predecessor.  

BP, under former Chief Executive Officer Bernard Looney, embraced net-zero emissions goals in a failed bet that oil consumption had peaked. It has since struggled to present a clear strategy for a turnaround. Its shares have lagged rivals such as Shell and Exxon Mobil Corp. in recent years. Elliott has a long history of taking stakes and pushing for changes at energy companies, including campaigns at NRG Energy Inc. and Canadian oil producer Suncor Energy Inc.     

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