Sunoco & SunCoke Part Ways

Philadelphia, Pennsylvania-based Sunoco Inc. (SUN - Analyst Report) announced that it has completed the segregation of SunCoke Energy Inc (SXC - Snapshot Report), following the distribution of the remaining shares owned by the former. The announcement of the separation was first made in June 2010 and filed the initial public offering for shares of SunCoke with the Securities and Exchange Commission in March 2011.

Sunoco distributed 56,660,000 shares of SunCoke to its shareholders, on a pro rata dividend basis of its equity interest in SunCoke to all Sunoco shareholders of record as of January 5, 2012.

Each stockholder of Sunoco will get approximately 0.53 of a share of SunCoke common stock for every share of Sunoco common stock held as of the specified date. The fractional shares of SunCoke common stock were not distributed.

With this move, SunCoke will no longer be a part of Sunoco and will trade as a 100% public company. Until this distribution, Sunoco controlled about 80.9% of the outstanding shares of SunCoke.

Following the spin off, SunCoke will transform itself into a major, high-class metallurgical coke manufacturer operating in the U.S. as well as overseas. The company will operate from the newly constructed plant in Middletown, Ohio, with a slated production capacity of 550,000 tons of coke and 46 megawatts of electricity annually. 

Sunoco, on the other hand, will be involved with Refining, Supply, Logistics and Retail Marketing businesses and emerge as a leading supplier of transportation fuels. However, the company is also planning to exit its refining business in or before July 2012.

In September last year, Sunoco announced plans to put up its Philadelphia and Marcus Hook refineries for sale, as a part of its restructuring initiatives to reduce losses and boost profitability.

We remain positive on the outlook for the new Sunoco – without refining – as it holds the promise of unlocking significant value from its non-refining businesses. We are also bullish on Sunoco’s retail marketing segment, which gives superior return and has attractive growth prospects.

However, we believe that these realignments will take some time to bear results. Hence, we expect the company to perform in line with the broader market and maintain a long-term Neutral recommendation.

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