By Rick Carew in Hong Kong and Brian Spegele in Beijing
HONG KONG-- Carlyle Group LP agreed to buy a majority stake in a
Chinese oil-lubricants business from Royal Dutch Shell PLC, giving
the private-equity firm a rare deal for control of a company in
China's energy industry.
Shell, which is shedding assets across the globe amid low oil
prices, said in a statement Friday it is focusing on its own
lubricants brands within China. Shell didn't disclose the price it
accepted for the 75% stake in the Tongyi oil lubricants business
from Carlyle and Huo's Group, an entity controlled by Tongyi
founder Huo Zhenxiang. Shell had purchased its stake in Tongyi from
Mr. Huo in 2006.
The Wall Street Journal reported in December that Shell was
shopping the asset, which had drawn interest from several global
private-equity firms.
The sale by Shell comes as the company is rethinking its
strategy in China. The oil giant has attempted to tap shale-gas
reserves in western China, owns a stake in a south China
petrochemicals facility and runs a chain of gas stations. The
company is also exploring offshore reserves in the South China
Sea.
But Shell has previously said it was scaling back investment in
shale exploration in China's Sichuan province following several
years of expensive challenges. The company, which is in the process
of acquiring British natural-gas company BG Group PLC for about $70
billion, has said it aims to sell some $15 billion in assets by the
end of this year.
For Carlyle, the Tongyi deal represents a bet that demand for
lubricants in China will continue growing. A rising middle class
has shown robust demand for buying cars in recent years, despite a
downshifting of the Chinese economy. Chinese gasoline demand has
also risen briskly this year, reflecting growing demand for
passenger vehicles.
"The lubricants industry is a growing market in China due to
increasing auto penetration," Carlyle Group managing director
Herman Chang said in the statement.
Carlyle Group will own a majority stake in Tongyi after the deal
closes, a Carlyle spokeswoman said. The parties said the
transaction is expected to close by early next year.
Shell has been hard hit by slumping oil prices. The company said
last month it planned to cut some 6,500 jobs across its
operations--about 7% of its total workforce. Shell said
second-quarter profit fell 33% from the same period last year, and
has said it is preparing itself for an oil-price downturn that
could last several years.
Write to Rick Carew at rick.carew@wsj.com and Brian Spegele at
brian.spegele@wsj.com
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