SunCoke to Acquire Lakeshore

Zacks

SunCoke Energy Inc.’s (SXC) operating division SunCoke Energy Partners, L.P. has inked an agreement to purchase Lakeshore Coal Handling Corporation for a proposed price of $29.6 million all in cash. The company will buy all of Lakeshore’s assets, specified liabilities and business operations. Lakeshore is a privately owned subsidiary of Beemsterboer Corporation.

The transaction is anticipated to conclude on Jul 31, 2013. The acquisition is subject to the signing of a definitive agreement and customary closing conditions.

SunCoke Energy’s proposed purchase will increase the company’s distributable cash flow per unit by roughly 6% annually and be immediately accretive to earnings. It plans to retain Lakeshore’s present operations and staff. In fact, Lakeshore offers coal handling and blending services to SunCoke Energy’s Indiana Harbor coke making business.

The addition of the Lakeshore unit to SunCoke Energy’s asset portfolio will boost its presence in the steel value chain. Lately, the company has been steadily venturing into the thriving steel markets of India and China, which are expected to grow 5.9% and 3.5% in 2013, respectively.

In early 2013, SunCoke Energy and VISA Steel Limited officially commenced its joint coke making program, VISA SunCoke Limited, in India where infrastructure and housing activities are on the rise.

The company’s Brazil operations will also capitalize on the increased steel demand in the country due to the ongoing infrastructure development for the 2014 football World Cup as well as the 2016 Olympics.

Meanwhile, the World Steel Association has predicted global steel demand to climb to 2.9% and 3.2% in 2013 and 2014, respectively. SunCoke Energy’s Lakeshore purchase looks well-timed given these positive projections and will sit well with the company’s broad growth objectives. Other coal operators expected to benefit from the upturn in worldwide steel demand are Arch Coal Inc. (ACI) and Walter Energy Inc. (WLT).

However, tighter environment legislations might continue to act as a headwind. Presently, SunCoke Energy carries a Zacks Rank #3 (Hold). 

A coal industry player well positioned at the moment is Zacks Ranked #2 (Buy) Hallador Energy Company (HNRG).

Based in Lisle, Ill., SunCoke Energy engages in mining and producing coke in the Americas. It offers metallurgical and thermal coal for steel making processes.

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