BP might announce the potential divestment during its capital market day.
British Petroleum (BP) is considering selling its lubricant business, Castrol, where the deal could be worth about $10 billion. It is a British multinational oil and gas company in London and is one of the world’s largest companies in revenues and profits.
The report says that BP is considering many options, one of which is selling the company. Elliott Management has also identified the subsidiary as one of its assets for potential disposal. According to the people related to the matter, the oil unit, which goes by the Castrol brand, could be worth around $10 billion in a deal.
According to reports, Elliot Management has built a stake in BP worth nearly GBP3.8 billion, making it the third-biggest investor in the company.
They are considering selling the company to regain the investors’ trust since they have been performing poorly for the last few years.
BP might announce the potential divestment during its capital market day. They added that discussions about the possible disposal are ongoing and that they have made no decisions yet.
Officials from Elliott and BP did not answer a response for comment.
Last week, Elliot pressured the oil company to take drastic measures to improve its performance after building a 5% interest, including a significant disposal program.
According to the BP website, the Castrol brand serves customers in more than 150 countries in the automotive, marine, industrial, aerospace, and energy production sectors.
Recently, the firm has ventured into developing liquid cooling technology to address the data centers’ overheating problem. Thanks to marketing partnerships with the National Basketball Association (NBA), Women’s National Basketball Association (WNBA), and motorsports, Castrol is also a well-known brand in international sports.
Last Monday, BP’s shares were on track to become the highest daily gain in two years. After that, activist shareholders will push the board to make changes and strategic adjustments to increase their returns.
The company’s fourth-quarter earnings revealed a 61% yearly decline, the lowest since the fourth quarter of 2020 when the pandemic reduced the oil demand.
Elliot has built the company for about £3.7 billion ($4.7 billion) in BP and is now demanding it to make drastic cost cuts and divest to support its future as a standalone company.
Elliott wants BP to modify its business model to align more closely with other major oil companies like Shell Plc by cutting spending in sectors like renewable energy and divesting non-core assets.
According to analysts from RBC Capital, BP’s lubricant business may be valued between $8 billion and $10 billion, based on earnings before interest, tax, depreciation, and amortization of $1 billion, as noted in a research report sent to their clients.
According to the analysts, the activist investor’s aggressive strategy could push BP to consider selling or spinning off their businesses, such as lubricants, US shale, and fuel marketing.
Under the leadership of their former chief executive Bernard Looney, BP was committed to achieving net zero emissions, making a failed bet that oil demand has reached its peak.
Since then, the company has struggled to provide a clear plan for a turnaround. In recent years, its share performance has fallen behind competitors like Shell and Exxon Mobil Corp.
Elliot has a long history of taking shares in energy companies and pushing for changes, including the previous campaign at NRG Energy Inc. and Canadian oil producer Suncor Energy Inc.
Elliot suggested that Suncor sell its non-core assets to gain its value back, such as its retail business, which was similar to the suggestion made by the activist hedge fund at Marathon Petroleum (MPC) a few years ago.