One of the surest temporary drivers for stock prices is a rumor of an impending asset buy. That was the situation on Wednesday with veteran motor oil and lubricant manufacturer Valvoline (VVV 1.34%), which saw its shares leap more than 12% on speculation of such a move.
On Wednesday, citing "people familiar with the matter," The Wall Street Journal reported that Saudi Aramco had approached Valvoline about buying the American company's retail operations. This immediately seized investors' attention, as Saudi Aramco is the largest oil company in the world by revenue.
Valvoline effectively confirmed that it had been approached for a sale. Aramco has not yet officially commented on the article. It isn't yet clear whether Aramco made a concrete financial offer, and how much it might be willing to spend on such a deal.
Late last year, Valvoline announced plans to separate its retail operations (in the form of oil-change stations) from its physical products business. Valvoline is best known to many auto owners for its line of motor oils and related car-care fluids. Roughly 60% of its total revenue comes from these products.
As Saudi Arabia's flagship oil company, Aramco is large, sprawling, and well capitalized. The company holds the record for the largest initial public offering in history, after it raised more than $29 billion by listing on that country's stock exchange in 2019.
But those excited investors should bear in mind that speculation about any deal is just that: speculation. There's no guarantee any arrangement will be made, so shareholders should be cautious about this latest scuttlebutt, regardless of the apparent interest of a would-be buyer with very deep pockets.