Sunoco, Inc. said that it has reached an agreement to sell its subsidiary Sunoco Chemicals, Inc., comprised of its polypropylene business, to Braskem S.A., one of the largest producers of petrochemicals and thermoplastic resins in the Americas, for approximately $350 million in cash.
The sale will include assets and inventory attributable to the polypropylene business, subject to a market-based working capital adjustment at the time of closing. The transaction is subject to regulatory approval and customary closing conditions, and is expected to close on or before March 31, 2010.
Chairman and Chief Executive Officer Lynn L. Elsenhans said, "The sale of our polypropylene business demonstrates the company's continued progress in realigning our portfolio of assets and improving returns on invested capital. This transaction produces value for our shareholders by monetizing a business that has not been able to meet its cost of capital and provides us with capital to redeploy for future growth in our areas of strategic focus. Sunoco is grateful to the talented and dedicated employees who made the business an important part of the company for many years. We wish them well as they prepare to join Braskem."
Included in the sale are Sunoco's polypropylene manufacturing facilities in Marcus Hook, Pennsylvania; La Porte, Texas; and Neal, West Virginia, which have the combined capacity to produce approximately 2.1 billion pounds of polypropylene annually. The sale also includes Sunoco's Research and Technology Center located in Pittsburgh, Pennsylvania.
Sunoco will retain its phenol and derivatives business, which has manufacturing assets located in Philadelphia, Pennsylvania and Haverhill, Ohio.
Sunoco expects to record a pre-tax loss on the sale in the first quarter of 2010 of approximately $185-$195 million.
Sunoco also announced today that it has permanently shut down its previously idled Eagle Point refinery in Westville, New Jersey due to continuing weak demand for refined products and unfavorable market conditions. Processing units at Eagle Point were idled in early November 2009 and have now been permanently shut down. However, refined product storage and handling operations there will continue. In addition, Sunoco is exploring a number of options for using the site in the future, including as a potential center for biofuels production. The shutdown is not expected to have a material financial impact on the company beyond what has previously been recorded in 2009.
Commenting on the shutdown, Ms. Elsenhans said, "Given weak industry dynamics, we are confident we are taking the right actions to improve our overall competitiveness, set the stage for investing in our strong regional brand, explore opportunities in biofuels, and provide customers with a broader choice of transportation fuel options."
Employees furloughed after the refinery was idled are eligible for a severance program that includes job placement assistance and retraining, as well as a continuation of medical benefits for the length of the severance.
Sunoco, Inc., headquartered in Philadelphia, PA, is a leading manufacturer and marketer of petroleum and petrochemical products.