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PRESS RELEASE
Fri, 07 August 2015
2015-059
Shell, Huo’s Group and The Carlyle Group reach agreement on Tongyi stake
Beijing - Shell has signed an agreement to sell its 75% stake in Tongyi Lubricants to Huo’s Group and The Carlyle Group. Subject to regulatory approvals, the transaction is expected to be completed by the end of 2015 or in early 2016.
Tongyi, a joint venture between Shell and Huo’s Group, is a prominent Chinese lubricants supplier with blending plants in Beijing, Xianyang of Shaanxi province and Wuxi of Jiangsu province. Shell acquired its 75% stake from Huo’s Group in 2006 and became the number one international lubricants supplier in China by share of supply, a position it still holds.
Carlyle’s equity investment for the transaction will come from Carlyle Asia Partners IV.
Xinsheng Zhang, Executive Chairman of Shell Companies in China, said: “Nine years ago when Shell acquired Tongyi, we began our win-win cooperation with Huo’s Group. By working together in partnership and cooperation, Shell and Huo’s Group have built Tongyi a strong brand with improved profitability and value proposition to customers in China.”
Shell Lubricants is expanding its business and market reach in China with established local technology and commercial centers that provide customized and timely support for distributors and customers around the country. Shell’s current focus is optimizing its lubricants portfolio and strengthening the Shell lubricants brands.
Huo Zhenxiang, Chairman of Huo’s Group, said: “Huo’s Group has been cooperating with Shell for nine years. I am delighted about the new development opportunity with Tongyi. Since I created this lubricant brand in 1993, with everybody’s great effort, Tongyi has become the No. 1 domestic private brand and company in China’s lubricants industry. The lubricants industry has a bright future in China. I am very confident that our cooperation with Carlyle will be another success story in the years to come.”
As a prominent domestic lubricants manufacturer and marketer, Tongyi has developed an extensive distributor network in China and the Tongyi brand has become a household name among many consumers in the country. These underpin the success of Tongyi and the company has experienced continuous profitable growth in recent years.
Herman Chang, Managing Director of the Carlyle Asia buyout team, said: “Carlyle's investments heavily focus on opportunities driven by the rising middle class in China. The lubricants industry is a growing market in China due to increasing auto penetration. Tongyi is well positioned to tap the market’s potentials with its strong brand, extensive nationwide sales network and experienced team. As a long-term investor, Carlyle will work closely with Mr. Huo and the Tongyi team to bring the company's success to the next level by leveraging our global resources and industry expertise.”
Carlyle has invested approximately $6.3 billion of equity in more than 80 transactions in China as of 30 June, 2015.