Sunoco, Inc. (NYSE: SUN) announced it will focus on its high-return logistics and retail businesses and undertake a series of initiatives to improve its financial and strategic flexibility to better position itself to deliver sustainable value to shareholders. The initiatives are intended to improve future earnings potential, limit future liabilities and provide Sunoco with a well-positioned financial and operational platform as well as an expense structure that is comparable to companies in the logistics and retail space.
The initiatives include:
- Repurchasing up to 19.9% of Sunoco common shares in open market purchases over the next 12 – 18 months.
- Increasing the quarterly dividend per share by 33% from 15 cents to 20 cents.
- Reducing Sunoco’s leverage by repurchasing up to $400 million of outstanding debt over the next year.
- Eliminating the need for pension fund contributions for the foreseeable future by contributing $80 million pre-tax to the pension fund.
- Eliminating future retiree medical expense by restructuring retiree medical liability and contributing approximately $200 million pre-tax to a dedicated Trust.
- Establishing a segregated environmental fund via a captive insurance company of approximately $250 million to be used for remediation of legacy environmental obligations.
Sunoco’s board and senior management, in consultation with independent financial and legal advisors, considered a wide range of strategic alternatives intended to deliver enhanced shareholder value. The initiatives announced today position Sunoco for growth and success while providing Sunoco with strategic and financial flexibility for the future.
In light of the company’s exit from manufacturing and its go-forward strategy, the following management changes were announced:
- Brian P. MacDonald, senior vice president and chief financial officer, will become president, chief executive officer, and a director of Sunoco, effective March 1, 2012. Sunoco’s current chairman, president, and chief executive officer, Lynn L. Elsenhans, will step aside as chief executive officer and president at that time.
- Ms. Elsenhans will remain chairman of Sunoco, Inc. and Sunoco Logistics Partners L.P. (NYSE: SXL) until Sunoco’s Annual Meeting of Shareholders in May 2012, at which time Mr. MacDonald will become chairman of Sunoco, Inc. and Sunoco Logistics Partners L.P.
- Michael Hennigan, currently president and chief operating officer of Sunoco Logistics, will become president and chief executive officer of Sunoco Logistics effective March 1, 2012.
Regarding the management changes, Presiding Director John P. Jones said, “Lynn Elsenhans has led Sunoco through one of the most significant periods of change in the Company’s history. With her deep expertise in manufacturing, Lynn has been instrumental in driving portfolio actions to reposition the company. Under her leadership, Lynn has overseen the sale of Sunoco’s heating oil and chemical businesses, the spin-off of SunCoke Energy, and the exit of the refining business, representing two-thirds of Sunoco’s assets since the time Lynn joined the company in 2008. While very difficult for employees and other Sunoco stakeholders, the restructuring was absolutely necessary to provide for a sustainable future for the Company and its stakeholders. We value Lynn’s insight and leadership, and on behalf of the Board, I want to thank her for her service and wish her all the best in her future endeavors.”