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BP hired Goldman Sachs to sell Castrol, sources say

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BP is under investor pressure, sources say

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BP has tapped potential private equity, strategic

investors,

sources say

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Company is working on more divestments, partial sale

renewables

By Andres Gonzalez

LONDON, May 22(Reuters) - BP has kicked off the

sale of its more than a century-old Castrol lubricants business,

according to two people with knowledge of the process, in a key

step in the British energy group's divestment plan to boost its

share price.

BP hired investment bank Goldman Sachs to sell the unit, the

sources said, speaking on condition of anonymity because the

matter is private. The group has already contacted potential

private equity and strategic bidders and distributed an

information memorandum to them, one of the people said.

The group said in February it was reviewing Castrol as part

of a plan to raise $20 billion by 2027 via asset sales to reduce

its debt.

In March Reuters reported that Saudi Aramco was

one of the parties considering a potential bid for the business,

but the start of the sale process and Goldman Sachs' hiring have

not been reported yet.

The sale could raise between $8 billion and $10 billion

based on Castrol's projected core earnings (EBITDA) of $1

billion for 2024, a second person said.

Responding to a Reuters query, BP did not comment on the

details of Castrol's sale but said its divestment programme was

progressing and it had already signed agreements for the first

$1.5 billion of its $20 billion target.

"To position us for growth and reduce net debt, we are

reallocating capital and driving greater focus in our portfolio,

including through the strategic review of Castrol," the company

said in a statement.

Goldman Sachs declined to comment.

Analysts at Bernstein said earlier this month that Castrol,

which ranks as the world's third-largest standalone lubricants

business behind those of Shell and ExxonMobil, could potentially

fetch $10-$11 billion.

Investors have put pressure on BP to improve profitability

after its shares underperformed rivals, reflecting concerns it

had put too much emphasis on renewable energy under former CEO

Bernard Looney.

BP's shares have lost around a quarter of their value in the

last 12 months, more than double the drop suffered by rival

Shell.

While reducing overall investments, current CEO Murray

Auchincloss has hiked spending on oil and gas and slashed BP's

low-carbon budget.

BP's strategy is in the spotlight after activist investor

Elliott Management took a stake in the company, and has been

asking the oil major for significant savings and management

changes, Reuters reported in April.

GLOBAL BRAND

Founded in 1899, Castrol has been a sponsor of Formula 1 and

World Rally Championship (WRC) teams, establishing a presence in

more than 150 countries.

BP acquired Castrol in 2000, in a deal valued at 3 billion

pounds. If successful, its sale would follow other deals, such

as BP agreeing to sell a stake in a firm invested in the TANAP

gas pipeline to Apollo Global Management.

As part of its broader asset sale plan, BP is also looking

to sell its Gelsenkirchen refinery and its mobility and

convenience businesses in Austria.

BP's divestments also include the sale of a 50% stake in

Lightsource bp, with bidders due to be short-listed in July,

Reuters reported.