Wednesday, November 16, 2011

Lubrizol Buys Greasemaker Chemtool
By George Gill
Lubrizol agreed to acquire Chemtool, saying its private label grease manufacturing is a good fit with Lubrizol’s additives business. Terms were not disclosed.
The deal is expected to close in the fourth quarter, following regulatory approvals.
Val Pakis, Lubrizol’s vice president for driveline and industrial additives, said Chemtool provides a service to its customers doing things some customers no longer want to do, which is a model familiar to Lubrizol.
“We have this custom solutions model here at Lubrizol where we blend a lot of finished lubricants for customers who for whatever reason don’t want to do that internally,” Pakis told Lube Report. “And over the years, both Chemtool and Lubrizol have shared a similar customer base, and many of our customers have decided to outsource their grease manufacturing, and they outsource it to Chemtool. So it’s a private label business, where Chemtool has been providing a service to our mutual customers, and that fits exactly what Lubrizol wants to do. They’re established as a primary private label grease manufacturer in North America.
“It’s not really in competition with our existing customer base at all,” Pakis continued. “It’s a niche – private label grease manufacturing – to provide a service to our existing customers.”
Pakis lauded Chemtool for its tremendous growth over the years. “We’re hoping that from our perspective, the synergy is that we have a global footprint,” he said. “It’s really tough for a company the size of Chemtool to follow their global customers around the world providing the level of service the customers demand, and it’s something Lubrizol does well. Secondly, from a technology perspective, we are good at what we do with additives, and hopefully there will be some ability to improve the quality of the grease products on a worldwide basis.”
While Chemtool has a small presence in both Europe and China, Pakis said Lubrizol will be able to help it expand its reach to a much wider geographic market. “To be able to satisfy a global major and to do that effectively these days is not easy for a smaller company, or a company the size of Chemtool,” he pointed out. “Lubrizol has affiliates, we have manufacturing facilities in 17 countries around the world, and we can leverage that not necessarily just to expand the grease business, but to expand all of Chemtool’s business globally and do it in an effective way. We’re just scratching the surface on all this.”
He emphasized that Chemtool, as part of Lubrizol’s industrial business, would remain an independent company, and will be led by Dean Athans, Jim Athans, and Dave Klesmith. “We’re going to run this as an arm’s length independent company – we couldn’t do it without them,” Pakis said.
“They’ve been a supplier to me for almost 50 years,” Chemtool Chairman James Athans told Lube Report. “Lubrizol is global, and we were, but not like they were. They’re going to help this company grow. It’s going to be independent, and keep the name. I have confidence they will do that because with all their acquisitions they’ve kept the companies independent. I couldn’t have found anyone that I’d rather sell to than this company.”
Industry contacts sounded a more cautious note about the acquisition.
“From a customer standpoint, and from their standpoint, this situation creates a real dilemma for Lubrizol and for the customers,” Steve Milam, president and CEO of Lubricating Specialties, told Lube Report. “It’s only through time that we’re going to be able to sort out what it means. We’re just going to have to be willing to give it some time. It is a real dilemma when you compete with your customers.”
Milam did compliment Lubrizol for calling and talking to its customers prior to issuing the announcement about acquiring Chemtool.
Chuck Coe, president and principal consultant for Grease Technology Solutions LLC, said some grease manufacturers that do business with Lubrizol may see cause for concern from a technology standpoint.
“It would depend a lot on your relationship with your additive suppliers,” Coe told Lube Report. “If you’re simply buying additives from Lubrizol, it’s probably less of a concern. If you’ve had cooperative development work with Lubrizol, I would think it would be a higher level of concern.”
He said another possible concern other grease manufacturers who purchase technology from Lubrizol might have is whether the additives maker would reserve its best technology for its own grease company. “As they do new developments for their Chemtool greases, are they going to make the newest technology as readily available to the general marketplace since they now own a grease manufacturer?”
According to its web site, Chemtool has facilities in eight locations: Rockton, Ill., Crystal Lake, Ill., Milan, Mich., Tehachapi, Calif., Elkhorn, Wis., Diegem, Belgium and Shanghai, China. The company is headquartered in Rockton.
In 1992, Chemtool acquired Metalcote, a specialty, private label manufacturer of lubricating greases based in Minneapolis, Minn. The Metalcote division manufactures private label greases and lubricants for a majority of the major oil companies, agricultural and consumer markets.
In July 2006, the company announced it had installed what it believed to be the world’s largest grease kettle, a reactor with capacity of 130,000 pounds. Chemtool at the time said most of its sales growth had come from contracts to blend volumes sold under other companies’ labels.
Lubrizol, headquartered in Wickliffe, Ohio, was itself acquired this year by Berkshire Hathaway for $9.7 billion.


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