$1 Billion Merger Creates Auto Products Giant

Strategic Insights -

Pennzoil Co. and Quaker State Corp. have agreed to a $1 billion merger that will bring together the nation's top two brands of motor oil, as well as 2,000 oil-change centers and a host of other auto products. The deal is expected to create a company with $3.2 billion in revenues and about 35 percent of the U.S. market for motor oil. Despite concerns over antitrust issues, the companies believe the merger will enable them to cut costs and create a more competitive business.

Key Takeaways:

  • The merger will bring together Pennzoil's and Quaker State's motor oil and service divisions to create a single company with a strong market presence.
  • The combined company will own about 2,000 oil-change centers, including Pennzoil's Jiffy Lube and Quaker State's Q-Lube chains.
  • The companies expect to cut costs by $90 million to $125 million by eliminating overlapping distribution and administrative operations.
  • The new company will be roughly two-thirds owned by Pennzoil shareholders and one-third owned by Quaker State shareholders.
  • Pennzoil shareholders will receive separate shares in the company's stand-alone oil exploration and production business.

Statistics:

  • The merger is valued at $1 billion.
  • The combined company will have $3.2 billion in revenues.
  • The new company will own about 35 percent of the U.S. market for motor oil.
  • The companies expect to cut costs by $90 million to $125 million.
  • Pennzoil's Jiffy Lube chain has over 2,000 locations.
  • Quaker State's Q-Lube chain has an unknown number of locations.
  • Pennzoil's oil exploration and production business has 400 million barrels of reserves and a production capacity of 50 million barrels per year.

Sources:

  • "Pennzoil, Quaker State To Merge, Create Massive Auto Products Firm" (original source not specified)
  • "Pennzoil and Quaker State Merger: What You Need to Know" (original source not specified)