SunCoke Energy (SXC) M&A Announcement Transcript

Summary of SunCoke Energy (SXC) Acquisition of Phoenix Global Conference Call Company and Industry - Company: SunCoke Energy (SXC) - Acquisition Target: Phoenix Global - Industry: Steel production services Key Points and Arguments 1. Acquisition Details: SunCoke Energy announced a definitive agreement to acquire Phoenix Global for $325 million, representing an acquisition multiple of approximately 5.4 times based on a last twelve months adjusted EBITDA of$61 million as of March 31, 2025 [5][6] 2. Funding and Synergies: The acquisition will be funded through cash on hand and borrowing from a revolver with a capacity of $350 million. Expected annual synergies from the transaction are approximately$15 million [6][17] 3. Strategic Fit: Phoenix Global is a leading provider of mission-critical services to major steel producers, enhancing SunCoke's reach to new industrial customers, including electric arc furnace operators [7][8] 4. Long-term Contracts: Phoenix has long-term contracts with a weighted average life of approximately six years, providing predictable revenue and limiting earnings volatility [11][12] 5. Operational Efficiency: SunCoke plans to leverage its operational and technical expertise to enhance Phoenix's operations, aiming for improved efficiency and increased EBITDA from existing services [38][57] 6. Market Expansion: The acquisition will allow SunCoke to expand its footprint in North America, Brazil, and Europe, and to serve a larger group of steel mills, particularly in the electric arc furnace segment [16][20] 7. Debt Profile Post-Acquisition: Post-acquisition, SunCoke's gross leverage is expected to be approximately 2.62 times based on pro forma combined adjusted EBITDA of $279 million, which is below the long-term target of three times [17][18] 8. Commitment to Shareholders: The acquisition is positioned to enhance long-term sustainable earnings growth and increase shareholder value, while maintaining the quarterly dividend [21][48] Additional Important Content 1. Limited Commodity Exposure: Phoenix's contracts are structured to limit exposure to commodity price fluctuations, primarily using indexed pricing for diesel fuel [30][31] 2. Future Growth Opportunities: There are significant opportunities for growth in the electric arc furnace market, where Phoenix currently serves only 7% of the U.S. market [42][43] 3. Granulated Pig Iron Project: The acquisition does not impact SunCoke's plans for the granulated pig iron project, which remains a priority despite delays [46][48] 4. Corporate Synergies: Immediate corporate synergies are expected from the removal of redundancies, with further efficiencies anticipated as operations are integrated [36][57] This summary encapsulates the critical aspects of the conference call regarding SunCoke Energy's acquisition of Phoenix Global, highlighting the strategic rationale, financial implications, and future growth potential within the steel production services industry.