In its latest move to shed noncore assets, Sunoco Inc. said yesterday that it was selling its chemical subsidiary to a Brazilian company for $350 million.
The Philadelphia refiner says that Braskem S.A., the world's eighth-largest petrochemical maker, will buy Sunoco's three polypropylene plants, including a polymer factory in Marcus Hook.
Sunoco's other chemical operations, including its Frankford phenol plant, were not included in the deal and will remain part of the Sunoco family.
Sunoco, whose chief business is petroleum refining and marketing, also announced that it has permanently shut down its Eagle Point refinery in Westville, Gloucester County. The refinery's 400 workers were idled in November.
"This provides some closure to employees - they're not wondering if we're going to restart the refinery," said Thomas P. Golembeski, Sunoco's spokesman.
The chemical unit has been on the market for more than a year as part of Sunoco's broad effort to improve earnings, which have been hammered by the economic downturn. Profit margins for refiners across the country have disappeared in the recession.
"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," Lynn L. Elsenhans, chief executive, said in a statement.
Sunoco expects to book a pretax loss in the first quarter of about $185 million to $195 million from the sale, which is expected to close at the end of March.
For the Brazilians, the polypropylene business represents an opportunity.
Braskem, a large plastics resin producer based in Sao Paulo that aims to become one of the top five petrochemical companies in the world, said the Sunoco unit has attractive margins. The purchase gives Braskem a foothold from which it can expand in the United States, Braskem's CEO, Bernardo Gradin, said in a conference call.
Gradin said Braskem intended to keep Sunoco Chemical's management team, which is based in Philadelphia. He said the Brazilians intended to grow the business, though they had no immediate plans to expand manufacturing capacity.
"The acquisition of Sunoco Chemicals provides Braskem with a solid and competitive platform for growth in the world's biggest market," Gradin said.
The cash sale included the Marcus Hook polymers plant, adjacent to Sunoco's refinery. It also includes manufacturing facilities in La Porte, Texas, and in Neal, W. Va. The plants have a combined capacity to produce 2.1 billion pounds of polypropylene annually.
The sale also includes Sunoco's Research and Technology Center in Pittsburgh.
Polypropylene plastic is used in a variety of applications, including food containers, bottle caps, and clothing.
Gradin said Sunoco Chemicals was the fourth-largest U.S. supplier of polypropylene. It sold about $720 million in resin last year, and Braskem estimated operational cash flow of more than $70 million, or 10 percent.
The chemical unit accounted for $36 million of Sunoco's 2008 earnings of $776 million.
Golembeski said the Brazilian buyers were uninterested in the chemical unit's other assets, and Sunoco would retain its phenol and derivatives business, which has manufacturing plants in the Frankford section of Philadelphia and in Haverhill, Ohio.
The permanent closure of the Eagle Point refinery was not a surprise. Sunoco said that it had too much production capacity along the Delaware River, and that its Philadelphia and Marcus Hook refineries would pick up the slack.
Some of Eagle Point's 400 employees had accepted severance payments when the plant was idled in November, but others remained on furlough, and now will be terminated.
Sunoco will continue to operate fuel storage and handling facilities on the Eagle Point site, and has no plans to sell the property.
Sunoco shares closed up $1.55 or 6.2 percent at $26.64. Braskem's American depositary receipts were up 63 cents, to $14.54.
Contact staff writer Andrew Maykuth at 215-854-2947 or email@example.com.