HollyFrontier Corporation last Tuesday announced that it has entered into a definitive agreement to acquire Red Giant Oil Company. Red Giant Oil, a private family-owned lubricants company founded in 1903, is one of the largest suppliers of locomotive engine oil in North America. The company said it is the sole supplier of lubes to the BNSF Railway and the Kansas City Southern and is a major supplier to Union Pacific.
Headquartered in Council Bluffs, Iowa, Red Giant Oil has storage facilities in Idaho, Utah and Wyoming, along with a blending and packaging facility in Texas. Following the acquisition, Red Giant Oil is expected to generate approximately $7.5 million in annual forecasted EBITDA for HollyFrontier.
George Damiris, President and CEO of HollyFrontier, commented, “We are pleased to announce the acquisition of Red Giant Oil, with its outstanding history and brand in the railroad lubricant industry. This transaction demonstrates the continued growth of our lubricant business and brings outstanding value to HollyFrontier.”
The purchase agreement, due to close this summer for an undisclosed amount, would keep the 50-employee business operating as a separate entity within HollyFrontier’s lubrication division, said Red Giant owner and President Sherryl Bills-Taylor. That was a key factor in agreeing to sell to HollyFrontier, she said, rather than a buyer that would consolidate it into another business.
Pat Carrigan, now vice president for business development and operations, would take over management of Red Giant upon Bills-Taylor's retirement. The Red Giant name would continue, but a secondary brand, Searle Petroleum Products, would be discontinued, Bills-Taylor said.
Red Giant Oil will become a part of HollyFrontier’s lubrication division, which includes Petro-Canada Lubricants of Mississauga, Ontario, acquired by HollyFrontier in February 2017.
With annual production of nearly 24 million gallons, in addition to being one of the leaders in the Medium Speed Diesel Engine Oil Industry, Red Giant also produces Motor Oils, Hydraulic Oils, Gear Oils, Greases, Compressor Fluids, Journal Oils and Curve Rail Grease.
This transaction is subject to customary closing conditions and is expected to close in the third quarter of 2018.
According to its website, Red Giant began doing business in 1910 selling oil and other products to farmers and farm equipment dealers in the Midwest. The name was later changed to E-Z Manufacturing Company and incorporated in the year 1946. Just two years later, the company's name was permanently changed to Red Giant Oil Company.
Fred J. Galvani, who had been a salesman for the company, purchased Red Giant Oil Company in 1959. Five years later, he purchased Searle Petroleum Company from the Harry Searle family, which had owned and operated that lubrication business since 1889.
In the mid 1980’s, Red Giant Oil/Searle Petroleum Company began selling new railroad engine oil to two Class 1 railroads.
Fred Galvani continued working at the company along with his son-in-law, Gary L. Bills, until his death in 2004. With the untimely death of Mr. Bills in 2005, the company became woman-owned by Fred’s widow, Lorraine Galvani, and his daughter, Sherryl G. Bills-Taylor.
HollyFrontier produces API Group I, II and III base oils at its plants in Tulsa, Oklahoma, with capacity to produce up to 9,500 barrels per day of Group I base oil, and in Mississauga, Ontario, Canada (Petro-Canada Lubricants, wholly owned by HollyFrontier) with capacity to produce up to 11,600 bpd of Group II and 4,000 bpd of Group III base oils.
HollyFrontier has about 3,500 employees and a market value of $12 billion, and reported 2017 net income of $805 million on revenue of $14.25 billion.