- Transaction will successfully complete separation of Global Products and Retail Services businesses transforming Valvoline into a pure-play automotive service provider with targeted 20%+ earnings per share (EPS) growth
- Valvoline to capitalize on highly compelling growth opportunities, while accelerating Retail Services evolution as hybrid and electric vehicle (EV) population grows
- Valvoline expects to use estimated $2.25 billion in net cash proceeds from Global Products sale to accelerate return of capital to shareholders, reduce debt and invest in Retail Services business
- Preliminary revenue for fiscal Q3 2022 of $957 million, reported diluted EPS of $0.55 and adjusted EPS of $0.58
- Valvoline to host conference call at 9 am ET today
Valvoline Inc. (NYSE: VVV), a global leader in vehicle care powering the future of mobility through innovative services and products, today announced that it has reached a definitive agreement with Aramco for the sale of Valvoline’s Global Products business for $2.65 billion in cash.
“The sale of Global Products will represent the successful outcome of our strategy to unlock the full, long-term value of our strong but differentiated Retail Services and Global Products businesses,” said Sam Mitchell, Valvoline CEO. “We have built two leading businesses that are well-positioned for continued success as they pursue their individual strategic priorities.
“After closing, we will focus on our market leading Retail Services business, including further enhancing our growth trajectory and world-class service model. Retail Services will benefit from a strong balance sheet and a clear strategy for value creation, including extending our world-class preventive auto maintenance service model to EV owners, OEMs and fleets as the car parc evolves.
“We are pleased that our Global Products team will have a strategic new home with Aramco to further invest and grow the business while developing the brand into a global lubricants leader. The partnership between the world’s leading energy producer and one of the world’s most trusted global lubricant brands creates a powerful combination that delivers meaningful benefits to employees, customers — including the Retail Services business — suppliers and investors.”
“Valvoline’s Global Products business fits perfectly with Aramco’s growth strategy for lubricants as it will leverage our global base oils production, contribute to our R&D capabilities and strengthen our existing relationships with OEMs. Valvoline’s brand strength and global recognition will continue to be developed and extended under Aramco’s stewardship. We are also very excited to have the outstanding people of Valvoline’s Global Products join the Aramco family as we continue to execute on our ambitious strategy,” said Mohammed Y. Qahtani, Senior Vice President of Downstream at Aramco.
Upon completion of the sale, Valvoline expects to use the majority of the anticipated net after-tax cash proceeds of approximately $2.25 billion to accelerate the return of capital to shareholders through share repurchases, with the remaining portion used for debt reduction and to invest in attractive growth opportunities in the Retail Services business.
Following the closing of the transaction, Valvoline will own the Valvoline brand for all retail services purposes globally, excluding China and certain countries in the Middle East and North Africa, while Aramco will own the Valvoline brand for all products uses globally. Valvoline and Aramco will expand their existing partnership to ensure that Valvoline’s iconic brand is managed in a consistent and holistic manner. In addition, Valvoline will procure motor oil and related products from the Global Products business through a long-term supply agreement.
Completion of the transaction is subject to customary closing conditions and regulatory approvals. The transaction is targeted to close in late calendar year 2022 or early 2023.
Compelling Opportunities for Standalone Retail Services Company
The transaction will have compelling benefits for Valvoline, including:
- Driving Retail Growth: The separation will allow Valvoline to focus on capturing the compelling growth of Retail Services building on 15 consecutive years of same-store sales growth, by continued investments in expansion of its retail footprint, with an increased emphasis on franchisee growth, and its already superior in-store customer experience.
- Accelerating Retail Services’ Evolution: Retail Services is well-positioned to capture opportunities from an evolving car parc by extending its world-class preventive auto maintenance service model to EV owners, OEMs and fleets, allowing Valvoline to leverage the strong momentum Retail Services has established long into the future.
- Optimizing Capital Structure and Capital Allocation Policies: The Company will have increased capital allocation flexibility and a targeted capital structure better aligned with Retail Services’ distinct value creation propositions. The business will benefit from a strong balance sheet to support Valvoline’s growth profile while returning capital to shareholders.
- Enhancing Corporate Governance and Focus: Operating Retail Services as an independent company will allow the management team to focus on unlocking the full potential of the business with the support of its Board of Directors, who bring significant automotive experience and a strong track record in retail services. Valvoline, operating solely as a retail services business, will be led by Sam Mitchell, CEO, and Lori Flees, President.
Based on currently available information, the Company expects Retail Services sales of approximately $1.5 billion in fiscal 2022, an increase of more than 20% from fiscal 2021.