British Petroleum (BP.US) asset divestment blocked, Castrol's business only received a takeover offer from One Rock

The Zhitong Finance App learned that, according to people familiar with the matter, One Rock Capital Partners, a medium-sized private equity firm in the US, has become one of the few bidders for Castrol's lubricants business under British Petroleum (BP.US), which highlights the difficulties this energy giant faces when disposing of its core assets.

People familiar with the matter said that a number of well-known energy companies and financial investment institutions have withdrawn from the bid, and the valuation of this business is expected to continue to decline. According to reports, One Rock plans to fully acquire this asset, while the Canadian Pension Plan Investment Commission only intends to acquire minority shares.

Reports show that institutions such as Saudi Aramco, Reliance Industries, Apollo Global Management, Lone Star Fund, Brookfield Asset Management, and Stonepeak Partners have expressed interest in the asset. People familiar with the matter said that the early estimate valued this lubricant business between 6 billion and 8 billion US dollars, far from the 10 billion US dollar sales price initially anticipated.

One of the people familiar with the matter said that due to the lukewarm market reaction, BP has opened up financial due diligence to another potential buyer that did not participate in the first round of bidding.

Will Hares, senior energy analyst at Bloomberg Intelligence, said: “Given that buyers are aware of the divestiture pressure faced by British Petroleum, it is not surprising that the final transaction price did not reach the target of $8 billion.”

People familiar with the matter stressed that relevant negotiations are still ongoing. One Rock and the Canadian Pension Plan Investment Committee may finally abandon the offer, and British Petroleum may also choose to suspend the sale of the asset. A spokesperson for all three companies declined to comment.

Pressure from aggressive investors

The sale of lubricants is a core initiative of BP CEO Murray Auchincloss to drive the company's strategy to return to the main oil and gas business. If the deal is blocked, it will put even more pressure on the incoming chairman Albert Manifold — the successor to outgoing Helge Lund in the context of Elliott Investment Management driving the company's strategic transformation.

BP promised to complete a $20 billion asset divestment by the end of 2027. So far, the company has reached a deal to sell the US onshore wind business to LS Power and completely withdraw from the wind power sector. The British company also agreed to sell Dutch retail gas station and electric vehicle charging station assets. Elliott, who holds about 5% of British Petroleum's shares, publicly called this week on Manifold's urgent need to improve the company's cost structure and capital allocation, and questioned the lack of urgency and ambition in its transformation plans.

Business highlights and acquirer background

Castrol's business covers the automotive and industrial lubricants sector, and is developing liquid cooling technology for artificial intelligence (AI) data centers. Its Indian listed subsidiary, Castrol India Ltd., has a market capitalization of about US$2.6 billion.

According to the official website, One Rock has managed a total capital of about 10 billion US dollars, focusing on the acquisition of controlling interests of European and American companies. The investment fields cover fields such as chemicals, processing industries, food manufacturing, commercial services, and environmental services, with Mitsubishi Corporation as its strategic partner.

In 2021, the company participated in the consortium's acquisition of NSRGY.US (NSRGY.US) North American bottled water business for $4.3 billion. It also invested in savory snack manufacturer Europe Snacks, bakery company Lewis Bakeries, and EnviroServe, which provides waste management and emergency response services. This month, One Rock completed a deal to sell its shares in Hawaiian energy storage distributor Island Energy Services to First Reserve and Fortress Investment Group in a new partnership.