Philadelphia, Pennsylvania-based Sunoco Inc. (SUN) announced the filling of the initial public offering (IPO) for shares of its subsidiary, SunCoke Energy Inc. (SunCoke) with the Securities and Exchange Commission. However, the number of shares on offer and the price range is yet to be decided.
This move is in regard to the proposed spin-off plan of the metallurgical coke manufacturing business, SunCoke, from the parent company. The announcement of the separation was made in June 2010.
Sunoco will continue to hold on to about 80% of SunCoke shares, post offering. The balance of the stock will be distributed among Sunoco shareholders in a tax-free spin-off. Sunoco expects to complete the entire proceedings of the IPO in 2011.
Following the separation, two independent trading companies will be created. Sunoco will be involved with Refining, Supply, Logistics and Retail Marketing businesses and emerge as a leading supplier of transportation fuels.
The offshoot, on the other hand, will transform itself into a major, high-class metallurgical coke manufacturer operating in the U.S. and abroad. SunCoke 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.
We expect this split to enhance the value of Sucono shares. The company will likely follow a well-coordinated strategic plan, invest in growth opportunities and strengthen the balance sheet post separation.
Sunoco, which enjoys a 31% interest in Sunoco Logistics Partners, L.P. (SXL), currently retains a Zacks #3 Rank (short-term Hold recommendation). We are also maintaining our long-term Neutral rating on the stock.
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