Shell has agreed to sell its 75 percent stake in Tongyi Lubricants to United States-based equity firm The Carlyle Group and Chinese conglomerate Huos Group. The latter founded the company and held the other 25 percent.
None of the parties disclosed sales price or details regarding the new division of ownership, but Carlyle will hold the majority stake, a company spokesman told Lube Report Asia.
Washington, D.C.-based Carlyle announced in a press release Friday that the deal to acquire the Beijing-headquartered lubricant supplier is expected to close in late 2015 or early 2016, pending regulatory procedures.
Tongyi has blending plants in Beijing; Xianyang, Shaanxi province; and Wuxi, Jiangsu province. The company is comprised of Beijing Tongyi Petroleum Chemical Co. and Xianyang Tongyi Petroleum Co., which together produce and market lubricants under the Monarch brand.
In September 2006, Shell China Holdings paid owner Huos Group for a 75 percent stake in Tongyi. Shell never divulged terms of its acquisition, but industry sources told Lube Report Asia that Shell paid approximately $100 million for the stake.
The Dow Jones news service reported in December 2014 that the global oil major had started looking for bidders via the assistance of China International Capital Corp., and estimated that the stake could fetch U.S. $350 million to $500 million.
Huos Group has been cooperating with Shell for nine years, said Huo Zhenxiang, chairman of Huos Group. I am delighted about the new development opportunity with Tongyi. Since I created this lubricant brand in 1993, with everybodys great effort, Tongyi has become the number one domestic private brand and company in Chinas lubricants industry. I am very confident that our cooperation with Carlyle will be another success story in the years to come.
The investment firms Carlyle Asia Partners IV department will handle the investment.
Carlyles investments heavily focus on opportunities driven by the rising middle class in China, Herman Chang, managing director of Carlyle Asiasbuyout team, said.The lubricants industry is a growing market in China due to increasing auto penetration. Tongyi is well-positioned to tap the markets potentials with its strong brand, extensive nationwide sales network and experienced team. As a long-term investor,Carlyle will work closely with Mr. Huo and the Tongyi team to bring the companys success to the next level by leveraging our global resources and industry expertise.
Shell claims that it remains the largest foreign lube supplier in China, even after divesting Tongyi. Shell opened its second blending plant in Tianjin in June and also operates plants in Shanghai, Zhuhai and Hong Kong.