Share prices of SunCoke Energy Inc. (SXC) inched up 0.94% to $17.16 on Oct 1, 2013 just after the acquisition of Kanawha River Terminals LLC (:KRT) by SunCoke Energy Partners, L.P. (SXCP). SunCoke Energy Partners is a subsidiary of SunCoke Energy Inc.
SunCoke Energy Partners took over 100% interest in Kanawha River Terminals from Traxys North America LLC for $86 million. The deal was financed by a combination of available cash and existing revolving credit facility. The partnership intends to maintain KRT’s current operations and retain its existing staff.
The deal is immediately accretive to earnings and cash flows of the publicly-traded master limited partnership. On an annual basis, the operations of KRT are expected to contribute $12 million to earnings before interest tax depreciation and amortization (:EBITDA) and $6 million or 18 cents per unit to the distributable cash flow.
KRT is a leading metallurgical and thermal coal blending and handling terminal service provider with a collective capacity to blend and transload more than 30 million tons of coal on an annual basis. KRT can deliver products to U.S. ports in the Gulf Coast, East Coast and Great Lakes due to its strategic river locations and convenient access to highways and railroads.
This is the second back-to-back acquisition made by the partnership in the recent past. On Aug 30, 2013, the partnership completed the acquisition of Lakeshore Coal Handling Corp. for $28.6 million. The deal would contribute $5 million to EBITDA and $4 million or $12 cents per unit to distributable cash flow on an annualized basis. Since Aug 30, 2013, SunCoke Energy Inc. has experienced a share price surge of 9.7%.
SunCoke Energy Partners manufactures coke used in the blast furnace production of steel and provides coal handling services to the coke, steel and power industries. The current acquisition would help the partnership in transporting its coke and coal to various locations.
SunCoke Energy Inc. has witnessed a steady rise in share prices, while successful acquisitions have contributed to the company’s EBITDA and distributable cash flow. Also, the recent 10-year extension of its existing agreement with steel making giant ArcelorMittal (MT) for the supply of 1.22 million tons of metallurgical coke annually is a major catalyst. Supported by strong fundamentals, the company presently has a short-term Zacks Rank #2 (Buy). We also have James River Coal Co. (JRCC) in the space with a Zacks Rank #2.
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