BP has kicked off the sale of its more than a century-old Castrol lubricants business, according to two people with knowledge of the process, in a key step in the British energy group’s divestment plan to boost its share price.
BP hired investment bank Goldman Sachs to sell the unit, the sources said, speaking on condition of anonymity because the matter is private. The group has already contacted potential private equity and strategic bidders and distributed an information memorandum to them, one of the people said.
The group said in February it was reviewing Castrol as part of a plan to raise $20 billion by 2027 via asset sales to reduce its debt. The sale could raise between $8 billion and $10 billion based on Castrol’s projected core earnings (EBITDA) of $1 billion for 2024.
Analysts at Bernstein said earlier this month that Castrol, which ranks as the world’s third-largest standalone lubricants business behind those of Shell and ExxonMobil, could potentially fetch $10-$11 billion.
Investors have put pressure on BP to improve profitability after its shares underperformed rivals, reflecting concerns it had put too much emphasis on renewable energy under former CEO Bernard Looney.
BP’s shares have lost around a quarter of their value in the last 12 months, more than double the drop suffered by rival Shell.
While reducing overall investments, current CEO Murray Auchincloss has hiked spending on oil and gas and slashed BP’s low-carbon budget.
BP’s strategy is in the spotlight after activist investor Elliott Management took a stake in the company, and has been asking the oil major for significant savings and management changes.
Source: Globalbankingandfinance