Shell pays £2bn for US lubricants rival Pennzoil

Shell is to buy the number one and number two car lubricant brands in the United States in a $2.9bn (£2.0bn) deal.

The British energy giant, which has lagged rivals in this sector in the US, will buy Pennzoil-Quaker State Co for $1.8bn in cash and $1.1bn in assumed debt. The move will add Pennzoil's 35 per cent share of the car lubricants market to Shell's current 3 per cent position, putting it in pole position.

The target company, which has the Pennzoil and Quaker State motor oil brands, also comes with other car care products and 2,000 Jiffy Lube stores. Shell already has a 20 per cent share of the diesel engine oil market.

Philip Watts, the chairman of Shell, said: "This is an important move in the implementation of our group strategy, which we communicated in December 2001, with deals of this type building excellent platforms for earnings growth into the future."

The managing director of Shell, Paul Skinner, said the company will cut the combined 8,200 workforce in the lubricant sector of Shell and Pennzoil by 15 per cent, or 1,200 jobs.

"These are two very strong complementary positions which would give us a market leadership position in the United States," he said.