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BP has agreed to sell a 65% stake in its Castrol lubricants business to US-based private equity firm Stonepeak for about USD 6 billion. The transaction values Castrol at USD 10.1 billion and forms a key part of BP's wider plan to divest USD 20 billion of assets to cut debt and improve shareholder returns. BP will retain a 35% holding through a new joint venture and plans to use the proceeds, including USD 800 million earmarked for dividends, to reduce net debt. The deal is expected to close by the end of 2026.
BP has reached an agreement to sell a 65% stake in its Castrol lubricants business to US private equity firm Stonepeak for around USD 6 billion. The transaction places an equity valuation of USD 10.1 billion on Castrol and represents the largest asset sale announced so far under BP's ongoing divestment programme. The move is aimed at lowering debt levels and strengthening cash returns after years of underperformance compared to industry peers. Advertisement
Under the structure of the deal, BP will retain a 35% interest in a newly formed joint venture with Stonepeak. This remaining stake will be subject to a two-year lock-in period, after which BP will have the option to exit. The company has indicated that the proceeds from the sale, including USD 800 million allocated for accelerated dividend payments, will primarily be used to reduce debt.
Market reaction to the announcement was mixed. BP shares initially rose by more than 1% before easing slightly later in the trading session. Analysts at RBC noted that while the headline valuation appeared strong, the enterprise value adjusted for minority interests and debt-like items was closer to USD 8 billion. They also raised concerns that selling a stable, cash-generating business such as Castrol could weaken the group's medium-term cash flows and earnings quality, despite helping near-term balance sheet repair.
The sale follows BP's decision earlier in the year to place its century-old lubricants business under strategic review. The company has increasingly shifted its focus back to core oil and gas operations, scaling back renewable energy investments as part of a broader reset of its strategy. BP has committed to divesting USD 20 billion of assets to reduce net debt from around USD 26 billion to a target range of USD 14 billion to USD 18 billion by the end of 2027. With the Castrol transaction, completed and announced divestments now total roughly USD 11 billion.
Stonepeak said separately that the Canada Pension Plan Investment Board will invest up to USD 1.05 billion as part of the transaction, giving it an indirect stake in Castrol. Stonepeak is known for investing in long-life infrastructure assets, including energy businesses and real estate, and has been actively deploying capital amid a broader push by private equity firms into carve-outs from large conglomerates.
The Castrol sale process began earlier this year, with Stonepeak and One Rock among the bidders that submitted offers. Media reports had indicated ongoing talks in recent months. The agreement comes at a time of leadership change at BP, following the appointment of Meg O'Neill as the company's next chief executive. The new management team has signalled a sharper focus on simplifying the portfolio, cutting costs, and prioritising oil and gas assets to improve shareholder returns.
BP expects the transaction to be completed by the end of 2026, subject to regulatory and customary approvals.
Source Reuters
5th Jun, 2025
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