BP’s Castrol Unit Gets One Rock Bid

One Rock Capital Partners, a US mid-market private equity firm, is one of the few remaining bidders for BP Plc’s Castrol lubricants business, people familiar with the matter said, illustrating the potential challenges for the key asset disposal by the oil major.

Several big-name energy companies and financial suitors have dropped out and valuation expectations have slipped, according to the people, who asked not to be identified as the information is private. One Rock is bidding for the entire asset, while Canada Pension Plan Investment Board is only interested in taking a minority stake, the people said.

The asset initially drew interest from Saudi Aramco, Reliance Industries Ltd., Apollo Global Management Inc., Lone Star Funds, Brookfield Asset Management Ltd. and Stonepeak Partners, among others, Bloomberg News has reported. The earlier bids valued the lubricants business at $6 billion to $8 billion, the people said. A sale was initially expected to fetch as much as $10 billion.

Given the lackluster response, BP has also given access of Castrol’s financials to another potential suitor, which wasn’t around at the initial bidding stages, one of the people said.

“I wouldn’t be surprised if BP didn’t hit their $8 billion target, given the pressures buyers know the company is under to deliver divestment progress,” said Will Hares, senior energy analyst at Bloomberg Intelligence.

Deliberations are ongoing and One Rock and CPPIB could decide against proceeding with their offers, the people said. BP may also opt to keep the asset for longer, they said. Representatives for BP, CPPIB and One Rock declined to comment.

Shares of BP fell as much as 1.4% on Thursday morning in London after the Bloomberg News report. The stock is down about 0.5% as of 10:09 a.m. local time.

Activist Pressure

A sale of the lubricants business is part of BP Chief Executive Officer Murray Auchincloss’ plan to refocus the firm on oil and gas and win back investor confidence. Any difficulty in doing so would also add pressure to BP’s incoming chairman Albert Manifold, who’s replacing Helge Lund amid pressure for a change in the company’s direction from Elliott Investment Management.

BP has pledged to divest $20 billion of assets by the end of 2027. It’s so far managed to strike a deal to sell its US onshore wind business to LS Power, completing its exit from wind power generation. The UK company has also agreed to offload its Dutch retail fuel sites and electric vehicle charging hubs.

Elliott, which has built up a stake of about 5% in BP as one of its largest-ever bets globally, on Monday called on Manifold to urgently improve the firm’s cost base and capital allocation. It has said BP’s turnaround plan lacks urgency and ambitions.

The Castrol business includes lubricants for autos and industries, and it has been developing liquid cooling technology for artificial intelligence data centers. Its Mumbai-listed subsidiary Castrol India Ltd. has a market value of about $2.6 billion.

One Rock, which has about $10 billion of cumulative capital commitments, focuses on buying controlling stakes in companies in North America and Europe, according to its website. The firm invests in a wide range of businesses from chemical and process industries and food manufacturing to business and environmental services. It counts Mitsubishi Corp. as a strategic partner.

The New York-based buyout firm was in the consortium that acquired Nestle SA’s bottled water business in US and Canada for $4.3 billion in 2021. It has also invested in savory snacks maker Europe Snacks, bakery firm Lewis Bakeries and EnviroServe, which provides waste management and emergency response services. This month, One Rock completed a sale of its majority stake in Island Energy Services, which operates storage and distribution network in Hawaii, to a newly formed partnership between First Reserve and Fortress Investment Group.

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