(BRK.A), (BRK.B)
Berkshire Hathaway’s specialty chemical company Lubrizol has inked an agreement to purchase the oilfield chemicals business from Weatherford International PLC.
The acquisition is valued somewhere in the realm $750-$825 million.
The deal is the biggest “bolt-on” acquisition Lubrizol has made since it was acquired by Berkshire in 2011 for $9 billion, and comes only a week after it signed a deal to buy detergent compounds producer Warwick Chemicals, which is headquartered in Mostyn, North Wales.
Continued Expansion
Lubrizol has been on an acquisition spree of late. Only four months ago the company moved into the medical device market by acquiring Vesta Inc., a maker of catheters and tubing based on silicone and thermoplastics based in ranklin, Wisconsin.
Lubrizol’s revenues for 2013 were $6.4 billion, and the addition of the Weatherford units gives it an expanded footprint in the booming oil services business.
Under the terms of the deal, Lubrizol will acquire Engineered Chemistry and its drilling fluids business, known as Integrity Industries.
According to Lubrizol, the addition of these two businesses provide Lubrizol with a more significant footprint in the $20 billion oilfield chemicals business and more importantly, extensive applications experience and end-user relationships.
Engineered Chemistry supplies additives and fluids for a range of oilfield activities, including cementing, drilling, flow assurance and fracturing. It offers chemistry expertise to solve problems throughout the oil and gas drilling process. The business consists of a core manufacturing and research organization which supports a global field distribution network. Engineered Chemistry was built through a series of acquisitions over the past 12 years and is headquartered in Houston, TX. It operates 10 sites located predominantly in North America.
Integrity Industries manufactures drilling fluid systems, including diesel, mineral oil and synthetic oil based fluids. The company supplies these drilling fluid systems to retail drilling fluid companies along with technical support. The business has occupied the same niche for more than 25 years and is recognized as an expert in oil based drilling systems and chemicals serving customers across a large North American footprint. Headquartered in Kingsville, TX, Integrity Industries operates approximately 14 locations.
“This proposed acquisition provides us a new growth platform as we build out a multi-billion business in specialty chemicals and drilling fluids for the oilfield space,” said James L. Hambrick, Lubrizol chairman, president and chief executive officer. “With the addition of the companies’ technologies, combined with improved fluid formulation and applications knowledge, Lubrizol will be better positioned to innovate more quickly and become a solutions provider for both multinational oilfield service companies as well as more regional customers which have a significant share of the North American market.”
The new units will be run under the moniker of Lubrizol Oilfield Solutions.
Increasing Global Manufacturing Capability
In addition to acquisitions, Lubrizol has also been expanding its global manufacturing capability, opening an additives manufacturing facility in Zhuhai, Guangdong, China, in 2013, and breaking ground on a $50 million chlorinated polyvinyl chloride (CPVC) compounding plant in Dahej, India, in April 2014.
Based in Wickliffe, Ohio, Lubrizol owns and operates manufacturing facilities in 17 countries, as well as sales and technical offices around the world. Founded in 1928, Lubrizol has approximately 7,500 employees worldwide. It sells its specialty chemical products in over 100 countries.
© 2014 David Mazor
Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.