Sunoco Expands Coking Unit IPO (SUN, SXC)

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Sunoco Inc. (NYSE: SUN) has announced a revised and expanded initial public offering for its SunCoke Energy Inc. business.  The company expects to issue 11.6 million shares of common stock and to raise a maximum of $226.8 million.  The company expects the newly issued shares to price in the $15 to $17 range.  Prior to this offering, there has been no public market for SunCoke.  The company has secured approval to list its shares on the New York Stock Exchange under the symbol “SXC.”

With a 45-year history of producing metallurgical coke, SunCoke estimates it is the largest independent producer of coke in the Americas.  Metallurgical coke is a principal raw material in steelmaking. SunCoke owns and operates four metallurgical cokemaking facilities in the United States and one facility in Brazil. The company is currently constructing a fifth U.S. facility where it expects to commence operations in the fourth quarter of 2011. Upon its completion, the company expects to increase its U.S. production capacity to 4.2 million tons of coke per year and its world-wide capacity to 5.9 million tons per year.  The company also owns and operates coal mining operations in Virginia and West Virginia producing 1.2 million tons of metallurgical coal per year.

SunCoke revenues grew from $458 million in 2006 to $1.3 billion in 2010.  Its bottom line expanded from less than $37 million for 2006 to $139 million in 2010.  For the quarter ending March 31, 2011 SunCoke reported that earnings fell 70% to $11.8 million from a year earlier on increased expenses.

SunCoke currently operates four metallurgical coke plants in the U.S. and Brazil, with a fifth U.S. plant slated for completion this year. Those facilities produce over 5 million tons of coke each year, an energy source that is used by steelmakers that utilize blast furnaces.  Prior to the IPO, Sunoco and SunCoke will enter into an agreement that will provide the framework for the separation of the businesses. The agreement will include the separation and distribution of some assets, liabilities and shared contracts.  For the three months ended March 31, SunCoke reported that its earnings fell 70% to $11.8 million from a year earlier as expenses rose sharply.

The S-1 lists Credit Suisse, Merrill Lynch and Goldman Sachs as joint book-running managers and Barclays, Citigroup and Wells Fargo as senior co-managers.  The S-1 also lists the following firms as additional co-managers: Deutsche Bank, Mitsubishi UFJ Securities, Mizuho Securities, PNC Capital Markets, Scotia Capital, SunTrust Robinson Humphrey, UBS Securities, Samuel A. Ramirez & Company, The Williams Capital Group.

The full amended S-1 filing is here.

JIM BERDOU