PHILADELPHIA -- Sunoco Inc. announced on Thursday that 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.
Chief among the changes: Lynn L. Elsenhans will step aside as CEO and president and Brian P. MacDonald, senior vice president and CFO, will become president, CEO and a director of Sunoco, effective March 1, 2012.
As reported in a Morgan Keegan/CSP Daily News Flash yesterday, Elsenhans will remain chairman of Sunoco Inc. and Sunoco Logistics Partners LP until Sunoco's annual meeting of shareholders in May 2012, at which time MacDonald will become chairman of Sunoco and Sunoco Logistics Partners.
Michael Hennigan, currently president and COO of Sunoco Logistics, will become president and chief executive officer of Sunoco Logistics effective March 1, 2012.
Elsenhans said, "Given Sunoco's latest strategic initiatives and its business focus on logistics and retail, now is the right time for me to step aside and enable the company to realign its management structure to fit its new profile. I have full confidence that Sunoco will be in good hands under Brian's leadership."
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 to 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; and establishing a segregated environmental fund via a captive insurance company of approximately $250 million to be used for remediation of legacy environmental obligations.
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 spinoff 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."
He added, "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."
Jones continued, "Brian MacDonald is a superb executive who is the ideal leader for Sunoco as we move from a manufacturing to a logistics and retail focus. He has played a leading role in Sunoco's transformation, and the board is confident that his vision, commitment to unlocking shareholder value, decisiveness, financial acumen and track record of results make him the right leader for the company, its shareholders and other stakeholders as we move forward."
Concerning the strategic changes, Jones said, "Our retail business also has steady cash flows, as well as an iconic brand and high-traffic locations."
MacDonald, 46, joined Sunoco in 2009 as senior vice president and CFO. He is also CFO and a director of Sunoco Logistics Partners. He joined Sunoco from Dell Inc. He held financial management positions at General Motors Corp. and its Isuzu Motors.
Sunoco is a leading logistics and retail company. Sunoco Logistics is an owner and operator of complementary pipeline, terminal and crude oil acquisition and marketing assets. Sunoco also has a network of approximately 4,900 retail locations in 23 states.
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