S-4
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As filed with the Securities and Exchange Commission on March 8, 2019

Registration No. 333-             

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

SUNCOKE ENERGY, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   3312   90-0640593

(State or other jurisdiction of

Incorporation or Organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

1011 Warrenville Road, Suite 600

Lisle, IL 60532

(630) 824-1000

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

Katherine T. Gates

1011 Warrenville Road, Suite 600

Lisle, IL 60532

(630) 824-1000

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

 

Michael Swidler

Mike Rosenwasser

Baker Botts L.L.P.

30 Rockefeller Plaza

New York, NY 10112

(212) 408-2511

 

John Goodgame

Lisa Hearn

Akin Gump Strauss Hauer & Feld LLP

1111 Louisiana Street, Suite 44

Houston, TX 77002

(713) 220-5800

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective and upon consummation of the merger described in the enclosed joint prospectus/consent statement/proxy statement.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer        Accelerated filer  
Non-accelerated filer        Smaller reporting company  
       Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☐

 

**

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  ☐

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)  ☐

 

 

CALCULATION OF REGISTRATION FEE

 

 

 

Title of Each Class of
Securities to be Registered
  Amount to be
Registered(1)
  Proposed Maximum
Offering
Price per Share
  Proposed Maximum
Aggregate
Offering Price(2)
  Amount of
Registration Fee(3)

Common Stock, par value $0.01 per share

  24,818,149   Not Applicable   $237,899,681.58   $28,833.44

 

 

(1)

Represents the maximum number of shares of SunCoke Common Stock estimated to be issuable upon the completion of the Merger described herein. This number is based on the number of shares of SXCP Public Units estimated to be outstanding immediately prior to completion of the Merger.

(2)

Estimated solely for purposes of calculating the registration fee pursuant to Rule 457 promulgated under the Securities Act of 1933, as amended, based on: (i) the product of (A) $13.42, the average of the high and low per unit prices for SXCP Common Units, as reported on the New York Stock Exchange on March 6, 2019, multiplied by (B) 17,727,249, the number of SXCP Public Units that may be exchanged for the Merger Consideration in the Merger.

(3)

Calculated by multiplying the proposed maximum aggregate offering price by 0.0001212.

Shares of SunCoke Common Stock are listed on the New York Stock Exchange (“NYSE”) under the symbol “SXC,” and SXCP Common Units are listed on the NYSE under the symbol “SXCP.”

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a), may determine.

 

 

 


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The information in this preliminary joint prospectus/consent statement/proxy statement may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary joint prospectus/consent statement/proxy statement is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

PRELIMINARY JOINT PROSPECTUS/CONSENT STATEMENT/PROXY STATEMENT—SUBJECT TO COMPLETION—DATED MARCH 8, 2019

 

LOGO    LOGO

EXPLANATORY NOTE

On February 4, 2019, SunCoke Energy, Inc. (“SunCoke”) and its wholly owned subsidiary SC Energy Acquisition LLC (“Merger Sub” and, together with SunCoke, the “SunCoke Parties”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with SunCoke Energy Partners, L.P. (“SXCP”) and its general partner SunCoke Energy Partners GP LLC (“SXCP General Partner” and, together with SXCP, the “SXCP Parties”). Pursuant to the Merger Agreement, Merger Sub will be merged with and into SXCP, with SXCP being the surviving entity (the “Merger”).

Pursuant to the Merger Agreement, each outstanding common unit representing limited partner interests in SXCP (the “SXCP Common Units”) that is held by a unitholder other than SunCoke and any entities that are partially or wholly owned and controlled, directly or indirectly, by SunCoke, including Merger Sub, Sun Coal & Coke LLC (“SC&C”) and SXCP (such units, the “SXCP Public Units”), will be converted into the right to receive (x) 1.40 shares of validly issued, fully paid and non-assessable SunCoke common stock, par value $0.01 per share (“SunCoke Common Stock”) and (y) a fraction of a share of SunCoke Common Stock equal to the product of (aa) the number of days beginning with the first day of the most recent full calendar quarter with respect to which an SXCP unitholder distribution record date has not occurred (or, if there is no such full calendar quarter, then beginning with the first day of the partial calendar quarter in which the Closing (as defined in the Merger Agreement) occurs), and ending on the day immediately prior to the Closing, multiplied by (bb) a daily distribution rate that is equal to the quotient of the most recent regular quarterly cash distribution paid by SXCP divided by 90, such product divided by $10.91, which was the closing price of the SunCoke Common Stock as of February 1, 2019, the last full trading day prior to the date of the execution of the Merger Agreement. All SXCP Common Units, other than the SXCP Public Units, will remain outstanding following the Merger.

Prior to the Merger, SunCoke will hold a special meeting of its stockholders (the “SunCoke Special Meeting”) to approve the issuance of SunCoke Common Stock pursuant to the terms of the Merger Agreement in connection with the Merger (the “Parent Stock Issuance”). The closing of the Merger is conditioned upon approval of the Parent Stock Issuance (the “Parent Stock Issuance Approval”).

The conflicts committee (“SXCP Conflicts Committee”) of the board of directors of SXCP General Partner (the “SXCP Board”), by a unanimous vote at a meeting duly called and held on February 4, 2019, (i) determined that the Merger Agreement and the transactions contemplated thereby are in the best interest of SXCP, including the holders of SXCP Public Units, (ii) approved the Merger Agreement and the transactions contemplated thereby, including the Merger (the foregoing constituting SXCP Special Approval under the First Amended and Restated Agreement of Limited Partnership of SXCP dated as of January 24, 2013, as amended (the “SXCP Partnership Agreement”)), and (iii) recommended that the SXCP Board approve the Merger Agreement and the consummation of the transactions contemplated thereby, including the Merger.

Based upon such approval, at a meeting duly called and held on February 4, 2019, the SXCP Board (a) determined that the Merger Agreement and the transactions contemplated thereby are in the best interest of SXCP, (b) approved the Merger Agreement and the transactions contemplated thereby, including the Merger, and (c) directed that the Merger Agreement be submitted to a vote of holders of SXCP Common Units (“SXCP Common Unitholders”) and authorized the SXCP Common Unitholders to act by written consent pursuant to Section 13.11 of the SXCP Partnership Agreement.

At a meeting duly called and held on February 4, 2019, the board of directors of SunCoke (the “SunCoke Board”) (i) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger and the Parent Stock Issuance, are in the best interests of SunCoke and its stockholders, (ii) approved and declared advisable the Merger Agreement and the transactions contemplated thereby, including the Merger and the Parent Stock Issuance, and (iii) resolved to submit the Parent Stock Issuance to a vote of SunCoke’s stockholders and recommend approval of the Parent Stock Issuance at the SunCoke Special Meeting (such recommendation, the “SunCoke Board Recommendation”).


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The SunCoke Board has set             , 2019 as the record date (the “SunCoke Vote Record Date”) for determining holders of SunCoke Common Stock (“SunCoke Stockholders”) entitled to vote at the SunCoke Special Meeting. If you are a SunCoke Stockholder of record as of the close of business on the SunCoke Vote Record Date, you may vote at the SunCoke Special Meeting. See the section titled “The SunCoke Special Meeting of Stockholders” of this joint prospectus/consent statement/proxy statement. The approval of the Parent Stock Issuance requires the affirmative vote (in person or by proxy) of the holders of a majority of the aggregate voting power present at the SunCoke Special Meeting or any adjournment or postponement thereof, provided a quorum is present. The Chairman of the SunCoke Board or the President of SunCoke may adjourn the SunCoke Special Meeting from time to time, whether or not there is a quorum. No notice of the time and place of adjourned meetings need be given except as required by law. The SunCoke Special Meeting may be postponed or canceled by resolution of the SunCoke Board upon public notice given prior to the date of the SunCoke Special Meeting.

The approval and adoption of the Merger Agreement and the Merger by SXCP requires the affirmative vote or consent of holders of at least a majority of the outstanding SXCP Common Units. Pursuant to the terms of a Support Agreement, dated as of February 4, 2019, by and between SC&C and SXCP (such agreement, the “Support Agreement”), SC&C, a wholly owned subsidiary of SunCoke which as of February 4, 2019, beneficially owned 28,499,899 SXCP Common Units representing approximately 61.7% of the outstanding SXCP Common Units, has irrevocably and unconditionally agreed to deliver a written consent (the “SC&C Written Consent”), covering all of the SXCP Common Units beneficially owned by it, approving the Merger, the Merger Agreement and any other matters necessary for consummation of the Merger and the other transactions contemplated in the Merger Agreement, within two business days after the effectiveness of the registration statement of which this joint prospectus/consent statement/proxy statement forms a part. The delivery of the SC&C Written Consent by SC&C will be sufficient to approve the Merger Agreement and the transactions contemplated thereby, including the Merger, on behalf of SXCP. As a result, no further action by any unitholder of SXCP is required under applicable law or otherwise to approve the Merger Agreement and the transactions contemplated thereby, including the Merger, and SXCP will not solicit the vote or consent of holders of SXCP Public Units (“SXCP Public Unitholders”) for approval of the Merger Agreement or the transactions contemplated thereby, including the Merger, and will not call a special meeting of the SXCP Common Unitholders for purposes of voting on the approval of the Merger Agreement and the transactions contemplated thereby, including the Merger.

SXCP PUBLIC UNITHOLDERS ARE NOT BEING ASKED FOR A CONSENT OR PROXY AND SXCP PUBLIC UNITHOLDERS ARE REQUESTED NOT TO SEND SXCP A CONSENT OR PROXY.

This joint prospectus/consent statement/proxy statement provides you with detailed information about the proposed Merger, the proposed Parent Stock Issuance and related matters. SunCoke and SXCP both encourage you to read the entire document carefully. In particular, please read “Risk Factors” beginning on page 19 of this joint prospectus/consent statement/proxy statement for a discussion of risks relevant to the Merger and the combined company.

 

Michael G. Rippey    Michael G. Rippey
President and Chief Executive Officer of
SunCoke Energy, Inc.
   Chairman, President and Chief Executive Officer of
SunCoke Energy Partners GP LLC

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE SHARES OF SUNCOKE COMMON STOCK TO BE ISSUED IN THE MERGER OR DETERMINED IF THIS JOINT PROSPECTUS/CONSENT STATEMENT/PROXY STATEMENT IS TRUTHFUL OR COMPLETE OR PASSED UPON ITS ADEQUACY OR ACCURACY. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this joint prospectus/consent statement/proxy statement is                 , 2019 and it was first mailed to SunCoke Stockholders and SXCP Common Unitholders on or about                 , 2019.


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LOGO

1011 Warrenville Road, Suite 600

Lisle, IL 60532

(630) 824-1000

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

To the Stockholders of SunCoke Energy, Inc.:

Notice is hereby given that a special meeting of stockholders of SunCoke Energy, Inc. will be held on             , 2019 at                      , local time, at [the Hotel Arista, 2139 CityGate Lane, Naperville, Illinois 60563] to consider and vote upon the proposal to approve the issuance of SunCoke Common Stock pursuant to the terms of the Merger Agreement in connection with the Merger (the “Parent Stock Issuance Proposal”).

The Parent Stock Issuance Proposal and related transactions are described in detail in the accompanying joint prospectus/consent statement/proxy statement, which you should read before you vote. If the Parent Stock Issuance Proposal is not approved by SunCoke Stockholders, the Merger cannot be completed.

Only SunCoke Stockholders of record at the close of business on             , 2019 will be entitled to notice of and to vote at the SunCoke Special Meeting and any adjournments or postponements thereof.

Your vote is very important. To ensure your representation at the SunCoke Special Meeting, please complete and return the enclosed proxy card or submit your proxy by telephone or via the Internet. Please vote promptly whether or not you expect to attend the SunCoke Special Meeting. Submitting a proxy now will not prevent you from revoking the proxy and voting in person at the SunCoke Special Meeting. If your shares are held in the name of a bank, broker or other nominee, please follow the instructions on the voting instruction card furnished to you by such bank, broker or other nominee.

On February 4, 2019, the SunCoke Board (i) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger and the Parent Stock Issuance, are in the best interests of SunCoke and its stockholders, (ii) approved and declared advisable the Merger Agreement and the transactions contemplated thereby, including the Merger and the Parent Stock Issuance, and (iii) resolved to submit the Parent Stock Issuance to a vote of SunCoke’s stockholders. The SunCoke Board hereby recommends that you vote “FOR” the Parent Stock Issuance Proposal at the SunCoke Special Meeting.

BY ORDER OF THE SUNCOKE BOARD

John J. DiRocco, Jr.

Vice President, Assistant General Counsel and Corporate Secretary

Lisle, Illinois

            , 2019


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IMPORTANT NOTE ABOUT THIS

JOINT PROSPECTUS/CONSENT STATEMENT/PROXY STATEMENT

This joint prospectus/consent statement/proxy statement incorporates by reference important business and financial information about SunCoke and SXCP and their respective subsidiaries from documents filed with the Securities and Exchange Commission (the “SEC”) that have not been included in or delivered with this joint prospectus/consent statement/proxy statement. This information is available without charge at the SEC’s website at www.sec.gov, as well as on the respective Internet websites of SunCoke (http://www.suncoke.com/English/investors/sxc/overview/default.aspx) and SXCP (http://www.suncoke.com/English/investors/sxcp/overview/default.aspx). See the section titled “Where You Can Find More Information.”

SunCoke Stockholders and SXCP Common Unitholders may also request copies of these publicly filed documents from SunCoke or SXCP without charge, upon written or oral request to SunCoke Energy, Inc., 1011 Warrenville Road, Suite 600, Lisle, IL 60532, Attention: Investor Relations, or by telephone at (630) 824-1907, or from SXCP, without charge, upon written or oral request to SunCoke Energy Partners, L.P., 1011 Warrenville Road, Suite 600, Lisle, IL 60532, Attention: Investor Relations, or by telephone at (630) 824-1987. In order to receive timely delivery of requested documents in advance of the SunCoke Special Meeting, your request should be received no later than             , 2019. If you request any documents, SunCoke or SXCP, as applicable, will mail them to you by first class mail, or another equally prompt means, within one business day after receipt of your request.

Except as otherwise specifically noted, or the context otherwise requires, as used in this joint prospectus/consent statement/proxy statement:

 

   

“Merger Consideration” means, with respect to each SXCP Public Unit outstanding immediately prior to completion of the Merger, (x) 1.40 shares of validly issued, fully paid and non-assessable SunCoke Common Stock (such conversion ratio, the “Exchange Ratio”) and (y) a fraction of a share of SunCoke Common Stock equal to the product of (aa) the number of days beginning with the first day of the most recent full calendar quarter with respect to which an SXCP unitholder distribution record date has not occurred (or, if there is no such full calendar quarter, then beginning with the first day of the partial calendar quarter in which the Closing occurs), and ending on the day immediately prior to the Closing, multiplied by (bb) a daily distribution rate that is equal to the quotient of the most recent regular quarterly cash distribution paid by SXCP divided by 90, such product divided by $10.91, which was the closing price of the SunCoke Common Stock as of February 1, 2019, the last full trading day prior to the date of the execution of the Merger Agreement;

 

   

“Merger Sub” means SC Energy Acquisition LLC, a wholly owned subsidiary of SunCoke;

 

   

“Merger Transactions” means the transactions contemplated by the Merger Agreement, including the Merger, the Parent Stock Issuance and the execution, delivery and performance of the Support Agreement;

 

   

“SXCP” means SunCoke Energy Partners, L.P.;

 

   

“SXCP Common Unitholder” means a holder of SXCP Common Units;

 

   

“SXCP Conflicts Committee” means the conflicts committee of the board of directors of SXCP General Partner;

 

   

“SXCP General Partner” means SunCoke Energy Partners GP LLC, the general partner of SXCP;

 

   

“SC&C” means Sun Coal & Coke LLC, a wholly owned subsidiary of SunCoke, the 100% owner of the SXCP General Partner and the majority owner of SXCP Common Units;

 

   

“SC&C Written Consent” means the written consent of SC&C adopting and approving in all respects the Merger Agreement and the transactions contemplated thereby, including the Merger, on behalf of SXCP;

 

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“SXCP Parties” means SXCP and SXCP General Partner;

 

   

“SXCP Public Units” means the outstanding SXCP Common Units that are held by a unitholder other than SunCoke and any entities that are partially or wholly owned and controlled, directly or indirectly, by SunCoke, including Merger Sub, SC&C and SXCP;

 

   

“SXCP Public Unitholder” means a holder of SXCP Public Units;

 

   

“SunCoke” means SunCoke Energy, Inc.; and

 

   

“SunCoke Parties” means SunCoke and SC Energy Acquisition LLC.

In “Questions and Answers” and in the “Summary” below, selected information from this joint prospectus/consent statement/proxy statement is highlighted, but not all of the information that may be important to you is included. To better understand the Merger Agreement and the Merger, and for a more complete description of its legal terms, you should carefully read this entire joint prospectus/consent statement/proxy statement, including the section titled “Risk Factors” beginning on page 19, as well as the documents that are incorporated by reference into this joint prospectus/consent statement/proxy statement. See the section titled “Where You Can Find More Information.”

We have not authorized anyone else to provide you with information other than the information contained or incorporated by reference in this joint prospectus/consent statement/proxy statement or to make additional representations. None of SunCoke, SXCP or any of their affiliates takes any responsibility for, or can provide any assurances as to the reliability of, any information that others may give you or representations that others may make. The information contained in this joint prospectus/consent statement/proxy statement and the documents incorporated herein by reference are accurate only as of its or their respective dates, regardless of the time of delivery of this joint prospectus/consent statement/proxy statement. SunCoke’s and SXCP’s business, financial condition, results of operations and prospects may have changed since those dates.

 

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TABLE OF CONTENTS

 

Questions and Answers

     vi  

General Questions and Answers

     vi  

Questions and Answers Specific to SunCoke Stockholders

     vii  

Questions and Answers Specific to SXCP Common Unitholders

     x  

Summary

     1  

The Merger

     1  

The Merger Parties

     1  

Required Approval of the Merger by the SXCP Common Unitholders

     2  

SunCoke’s Ownership Interest in and Control of SXCP

     2  

Recommendations of the SXCP Conflict Committee and the SXCP Board and Their Reasons for the Merger

     2  

Opinion of the SXCP Conflicts Committee’s Financial Advisor

     3  

The SunCoke Special Meeting of Stockholders

     3  

Recommendation of the SunCoke Board and Its Reasons for the Merger

     3  

Opinion of SunCoke’s Financial Advisor

     4  

Interests of Certain Persons in the Merger Transactions

     4  

Market Price and Cash Distribution Information

     5  

The Merger Agreement

     5  

Comparison of the Rights of SunCoke Stockholders and SXCP Common Unitholders

     9  

Material U.S. Federal Income Tax Consequences

     9  

Other Information Related to the Merger

     10  

Summary of Risk Factors

     11  

Selected Historical and Pro Forma Financial Information of SunCoke and SXCP

     13  

Selected Historical and Pro Forma Financial Information of SunCoke

     14  

Selected Historical Financial Information of SXCP

     15  

Comparative and Pro Forma Per Share/Unit Data

     16  

Market Price and Cash Distribution Information

     18  

Risk Factors

     19  

Risks Related to the Merger

     19  

Tax Risks Related to the Merger and the Ownership of SunCoke Common Stock Received in the Merger

     22  

Risks Inherent in an Investment in SunCoke

     23  

The SunCoke Special Meeting of Stockholders

     25  

Date, Time and Place

     25  

The Parent Stock Issuance Proposal

     25  

Board Recommendation

     25  

Record Date; Outstanding Shares; Shares Entitled to Vote

     26  

Quorum

     26  

Required Vote

     26  

Stock Ownership of and Voting of SunCoke’s Directors and Executive Officers

     26  

Voting and Submitting a Proxy for SunCoke Common Stock Held by Holders of Record

     26  

Voting and Submitting a Proxy for SunCoke Common Stock Held in Street Name

     27  

Revocability of Proxies; Changing Your Vote

     27  

Solicitation of Proxies

     28  

No Other Business

     28  

Adjournments

     28  

Attending the SunCoke Special Meeting

     28  

Assistance

     28  

 

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The Merger

     29  

General

     29  

SunCoke’s Ownership Interest in and Control of SXCP

     29  

Background of the Merger

     30  

Resolution of Conflicts of Interest; Standards of Conduct and Modification of Duties

     36  

Recommendations of the SXCP Conflicts Committee and the SXCP Board and Their Reasons for the Merger

     37  

Unaudited Financial Projections of SunCoke and SXCP

     42  

Opinion of the SXCP Conflicts Committee’s Financial Advisor

     44  

Recommendation of the SunCoke Board and Its Reasons for the Merger

     54  

Opinion of SunCoke’s Financial Advisor

     55  

Interests of Certain Persons in the Merger Transactions

     66  

No Appraisal Rights

     70  

Regulatory Matters

     70  

Listing of the SunCoke Common Stock to be Issued in the Merger

     70  

Accounting Treatment

     71  

The Merger Agreement

     72  

Structure of the Merger

     72  

Exchange of Units; Fractional Share Proceeds

     73  

Conditions to the Merger

     74  

Representations and Warranties

     75  

Covenants and Other Agreements

     77  

Indemnification and Insurance

     79  

SunCoke Board Recommendation and SunCoke Adverse Recommendation Change

     80  

Termination

     82  

Expense Reimbursement and Termination Fee

     82  

Amendment and Waiver

     83  

Support Agreement

     83  

The Merger Parties

     84  

Comparison of the Rights of SunCoke Stockholders and SXCP Common Unitholders

     85  

Purpose and Term of Existence

     85  

Authorized Capital

     86  

SunCoke Dividends; SXCP Distributions

     86  

Merger or Consolidation

     88  

Disposal of Assets

     90  

Management by SunCoke Board; SXCP General Partner

     90  

Nomination and Election of SunCoke Board; SXCP General Partner

     90  

Removal of SunCoke Directors; Withdrawal or Removal of the SXCP General Partner

     91  

Filling Vacancies on the SunCoke Board; Replacing the SXCP General Partner

     92  

Transfer of General Partner Interest

     92  

Limited Call Rights

     93  

Preemptive Rights

     93  

Amendment of Governing Documents

     94  

Meetings, Voting and Action by Written Consent

     97  

Stockholder Proposals and Director Nominations

     99  

Limitation on Liability; Indemnification; Advancement of Expenses

     99  

Fiduciary Duties; Conflicts of Interest

     100  

Taxation

     101  

No Appraisal Rights

     102  

Dissolution

     102  

 

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Description of SunCoke Common Stock

     103  

SunCoke Common Stock

     103  

Certain Provisions in the SunCoke Organizational Documents

     103  

Exclusive Forum

     104  

Limitation of Liability and Indemnification

     104  

Material U.S. Federal Income Tax Consequences

     105  

Tax Consequences of the Merger to U.S. Holders of SXCP Public Units

     106  

Tax Consequences to U.S. Holders of Owning and Disposing of SunCoke Common Stock Received in the Merger

     107  

Information Reporting and Backup Withholding

     108  

Legal Matters

     109  

Experts

     109  

Future Stockholder Proposals

     109  

Where You Can Find More Information

     109  

Documents Incorporated By Reference

     111  

Information Regarding Forward-Looking Statements

     111  

SunCoke Energy, Inc. Index To Unaudited Pro Forma Condensed Consolidated Financial Statements

     F-1  

Annex A:

  Agreement and Plan of Merger      A-1  

Annex B:

  Opinion, dated February 4, 2019, of the SXCP Conflicts Committee’s Financial Advisor      B-1  

Annex C:

  Opinion, dated February 4, 2019, of SunCoke’s Financial Advisor      C-1  

 

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QUESTIONS AND ANSWERS

The following section provides brief answers to certain questions that you may have regarding the Merger Agreement, the proposed Merger and the Parent Stock Issuance. Please note that this section does not address all issues that may be important to you as a SunCoke Stockholder and/or a SXCP Common Unitholder. Accordingly, you should carefully read this entire joint prospectus/consent statement/proxy statement, including each of the annexes, and the documents that have been incorporated by reference into this joint prospectus/consent statement/proxy statement.

General Questions and Answers

Q. Why am I receiving these materials?

A. The SunCoke Parties and the SXCP Parties have agreed to merge Merger Sub, a wholly owned subsidiary of SunCoke, with and into SXCP, with SXCP being the surviving entity in the Merger as an indirect wholly owned subsidiary of SunCoke. Each of SunCoke and SXCP is sending these materials to the SunCoke Stockholders and the SXCP Common Unitholders, as applicable.

These materials are being sent to help SunCoke Stockholders decide how to vote their shares of SunCoke Common Stock regarding the matters described herein.

This document constitutes (i) both a proxy statement and prospectus of SunCoke and (ii) a consent statement of SXCP. This document is a proxy statement because the SunCoke Board is soliciting proxies from the SunCoke Stockholders in connection with the approval of the Parent Stock Issuance. This document is a prospectus because SunCoke, in connection with the Merger, is offering SunCoke Common Stock in exchange for outstanding SXCP Public Units. This document is a consent statement because SC&C will, pursuant to the Support Agreement, sign a written consent to the Merger using this document.

Q. What will happen to SXCP as a result of the Merger?

A. If the Merger is successfully completed, Merger Sub will be merged with and into SXCP, with SXCP being the surviving entity in the Merger as an indirect wholly owned subsidiary of SunCoke. In addition, if the Merger is successfully completed, SXCP Common Units will no longer be listed and traded on the New York Stock Exchange (the “NYSE”).

Q. Why are SunCoke and SXCP proposing the Merger?

A. SunCoke and SXCP believe that the Merger will benefit both SunCoke Stockholders and SXCP Common Unitholders. See the sections titled “The Merger—Recommendation of the SunCoke Board and Its Reasons for the Merger” and “The Merger—Recommendations of the SXCP Conflicts Committee and the SXCP Board and Their Reasons for the Merger.”

Q. When will the Merger be completed?

A. SunCoke and SXCP are working to complete the Merger as soon as possible. A number of conditions must be satisfied before SunCoke and SXCP can complete the Merger. Although SunCoke and SXCP cannot be sure when all of the conditions to the Merger will be satisfied, SunCoke and SXCP expect to complete the Merger as soon as practicable following the SunCoke Special Meeting (assuming the Parent Stock Issuance is approved at the SunCoke Special Meeting). See the section titled “The Merger Agreement—Conditions to the Merger.” Assuming timely satisfaction of other closing conditions, including approval of the Parent Stock Issuance at the SunCoke Special Meeting, the Merger is targeted to close in the late second quarter or early third quarter of 2019.

 

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Q. What percentage of outstanding SunCoke Common Stock will SXCP Public Unitholders own after the successful consummation of the Merger?

A. If the Merger is successfully completed, based on the number of shares of SunCoke Common Stock and SXCP Common Units outstanding as of the date of this joint prospectus/consent statement/proxy statement, the shares of SunCoke Common Stock that the SXCP Public Unitholders receive in the Merger will collectively represent approximately [    ]% of the outstanding shares of SunCoke Common Stock following completion of the Merger.

Q. What are the interests in the Merger Transactions of the respective officers and directors of each of SunCoke and SXCP?

A. In considering the recommendations of the SunCoke Board, SunCoke Stockholders should be aware that the executive officers and directors of SunCoke have interests in the Merger Transactions that may differ from, or may be in addition to, the interests of SunCoke Stockholders generally. These interests may present such executive officers and directors with actual or potential conflicts of interests, and these interests, to the extent material, are described in the section titled “The Merger—Interests of Certain Persons in the Merger Transactions.” The SunCoke Board was aware of these interests and considered them, among other matters, prior to providing its approval and recommendation with respect to the Merger Agreement and the transactions contemplated thereby.

In considering the recommendations of the SXCP Conflicts Committee and the SXCP Board, SXCP Common Unitholders should be aware that the executive officers and directors of the SXCP General Partner have interests in the Merger Transactions that may differ from, or may be in addition to, the interests of SXCP Common Unitholders generally. These interests may present such executive officers and directors with actual or potential conflicts of interests, and these interests, to the extent material, are described in the section titled “The Merger—Interests of Certain Persons in the Merger Transactions.” The SXCP Conflicts Committee and the SXCP Board were aware of these interests and considered them, among other matters, prior to providing their respective approvals and recommendations with respect to the Merger Agreement and the transactions contemplated thereby.

Q. Who do I call if I have further questions about the Merger Agreement, the Merger or the Parent Stock Issuance?

A. If SunCoke Stockholders or SXCP Common Unitholders have further questions or if they would like additional copies, without charge, of this document, they may call SunCoke’s or SXCP’s Investor Relations Departments at (630) 824-1907 or (630) 824-1987, respectively, or Morrow Sodali LLC (“Morrow Sodali”), which is acting as SunCoke’s proxy solicitation agent in connection with the SunCoke Special Meeting, at (203) 658-9400 (for banks and brokers) or (toll-free) at (800) 662-5200 (for all others).

Q. What happens if the Merger is not consummated?

A. If for any reason the Merger is not consummated, SXCP Common Units will continue to be listed and traded on the NYSE.

Questions and Answers Specific to SunCoke Stockholders

Q. When and where will the SunCoke Special Meeting be held?

A. The SunCoke Special Meeting will be held on             , 2019 at                     , local time, at [the Hotel Arista, 2139 CityGate Lane, Naperville, Illinois 60563].

 

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Q. Who is entitled to vote at the SunCoke Special Meeting?

A. If you are a record holder of SunCoke Common Stock as of the close of business on the SunCoke Vote Record Date, you may vote at the SunCoke Special Meeting. See the section titled “The SunCoke Special Meeting of Stockholders.”

Q. Who may attend the SunCoke Special Meeting?

A. SunCoke Stockholders (or their authorized representatives) and SunCoke’s invited guests may attend the SunCoke Special Meeting. All attendees should be prepared to present government-issued photo identification (such as a driver’s license or passport) for admittance.

Q. What are SunCoke Stockholders being asked to vote on at the SunCoke Special Meeting?

A. SunCoke Stockholders are being asked to consider and vote on the Parent Stock Issuance Proposal to approve the Parent Stock Issuance pursuant to the terms of the Merger Agreement in connection with the Merger.

Q. Why is the Parent Stock Issuance, but not the Merger or the Merger Agreement, being considered and voted upon by SunCoke Stockholders?

A. Under Delaware law, a vote of the SunCoke Stockholders is not required to approve the Merger or adopt the Merger Agreement. Under NYSE rules, stockholder approval is required prior to the issuance of SunCoke Common Stock if the number of shares of common stock to be issued equals 20% or more of the number of shares of SunCoke Common Stock outstanding prior to the issuance. The Parent Stock Issuance is expected to result in the issuance of a number of shares of SunCoke Common Stock equal to approximately [    ]% of the shares of SunCoke Common Stock outstanding immediately prior to the effective time of the Merger. Accordingly, SunCoke Stockholders are being asked to consider and vote upon the Parent Stock Issuance.

Q. What vote is required to approve the Parent Stock Issuance Proposal?

A. The approval of the Parent Stock Issuance requires the affirmative vote (in person or by proxy) of the holders of a majority of the aggregate voting power present at the SunCoke Special Meeting or any adjournment or postponement thereof, provided a quorum is present. The Merger will not be completed unless the Parent Stock Issuance Proposal is approved.

Q. What constitutes a quorum for the SunCoke Special Meeting?

A. The presence, in person or by proxy, of SunCoke Stockholders representing a majority of the shares of SunCoke Common Stock outstanding on the SunCoke Vote Record Date will constitute a quorum for the SunCoke Special Meeting.

Q. What are the procedures for adjournment or postponement of the SunCoke Special Meeting?

A. The Chairman of the SunCoke Board or the President of SunCoke may adjourn the SunCoke Special Meeting from time to time, whether or not there is a quorum. No notice of the time and place of adjourned meetings need be given except as required by law. The SunCoke Special Meeting may be postponed or canceled by resolution of the SunCoke Board upon public notice given prior to the date of the SunCoke Special Meeting.

Q. What if I do not vote my SunCoke Common Stock or if I abstain from voting?

A. The approval of the Parent Stock Issuance Proposal requires the affirmative vote (in person or by proxy) of the holders of a majority of the aggregate voting power present at the SunCoke Special Meeting or any adjournment

 

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or postponement thereof, provided a quorum is present. If you abstain from voting on the Parent Stock Issuance Proposal, your shares of SunCoke Common Stock will be counted as present for purposes of establishing a quorum, but the abstention will not be counted as a vote cast either “FOR” or “AGAINST” the Parent Stock Issuance Proposal.

The obligations of the parties to complete the Merger are conditioned upon the Parent Stock Issuance Approval. Accordingly, a vote against or an abstention with respect to the Parent Stock Issuance Proposal, or a failure to vote on the Parent Stock Issuance Proposal, to the extent such failure prevents the establishment of a quorum, will have the same effect as a vote against the Parent Stock Issuance Proposal and the Merger (although no vote “FOR” or “AGAINST” the Merger is taking place).

Q. How does the SunCoke Board recommend that the SunCoke Stockholders vote?

A. The SunCoke Board recommends that SunCoke Stockholders vote “FOR” the Parent Stock Issuance Proposal.

On February 4, 2019, the SunCoke Board (i) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger and the Parent Stock Issuance, are in the best interests of SunCoke and its stockholders, (ii) approved and declared advisable the Merger Agreement and the transactions contemplated thereby, including the Merger and the Parent Stock Issuance, and (iii) resolved to submit the Parent Stock Issuance to a vote of SunCoke’s stockholders. The SunCoke Board hereby recommends that you vote “FOR” the Parent Stock Issuance Proposal. For more information regarding the recommendation of the SunCoke Board, see the section titled “The Merger—Recommendation of the SunCoke Board and Its Reasons for the Merger.”

In considering the recommendation of the SunCoke Board, SunCoke Stockholders should consider that the executive officers and directors of SunCoke may have interests that differ from, or are in addition to, their interests as SunCoke Stockholders. See the section titled “The Merger—Interests of Certain Persons in the Merger Transactions.”

Q. How do I submit my proxy for the SunCoke Special Meeting?

A. If you are a stockholder of record, you may submit a proxy via the Internet, by phone, or by mail. If you hold your SunCoke Common Stock in “street name” with a broker, bank or other nominee, you should follow the instructions provided by your broker, bank or other nominee. See the section titled “The SunCoke Special Meeting of Stockholders.”

Q. How many votes do I have?

A. SunCoke Stockholders have one vote per share of SunCoke Common Stock.

Q. What should I do if I receive more than one set of voting materials for the SunCoke Special Meeting?

A. You may receive more than one set of voting materials for the SunCoke Special Meeting and the materials may include multiple proxy cards or voting instruction cards. For example, you will receive a separate set of voting materials for each brokerage account in which you hold SunCoke Common Stock. Additionally, if you are a holder of record registered in more than one name, you will receive more than one set of voting materials. Please complete, sign, date and return each proxy card according to the instructions on it.

 

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Q. If my shares of SunCoke Common Stock are held in street name by my bank, broker or other nominee, will my bank, broker or other nominee automatically vote my shares for me?

A. No. If your shares of SunCoke Common Stock are held in street name, you must instruct the broker, bank or other nominee on how to vote your shares. See the section titled “The SunCoke Special Meeting of Stockholders.”

Q. If I am planning to attend the SunCoke Special Meeting in person, should I still vote by proxy?

A. Yes. Whether or not you plan to attend the SunCoke Special Meeting, you should vote by proxy. Your SunCoke shares will not be voted if you do not vote by proxy or do not vote in person at the SunCoke Special Meeting.

Q. What happens if I sell my SunCoke Common Stock after the SunCoke Vote Record Date but before the SunCoke Special Meeting?

A. If you transfer shares of your SunCoke Common Stock after the SunCoke Vote Record Date but before the date of the SunCoke Special Meeting, you will retain your right to vote at the SunCoke Special Meeting.

Q. May I change my vote after I have delivered my proxy card?

A. Yes. If you are a stockholder of record, you can change your vote within the regular voting deadlines by voting again by telephone or via the Internet, executing and returning a later dated proxy card, attending the annual meeting and voting in person, or by delivering a written notice of your revocation to SunCoke’s Corporate Secretary at 1011 Warrenville Road, Suite 600, Lisle, IL 60532. If you hold your SunCoke Common Stock in street name, you should follow the instructions provided by your banker, broker or other nominee. See the section titled “The SunCoke Special Meeting of Stockholders.”

Q. What will SunCoke Stockholders receive in the Merger?

A. SunCoke Stockholders will retain the SunCoke Common Stock they currently own, but will not receive any additional SunCoke Common Stock in the Merger. SunCoke expects that the Merger will simplify SunCoke’s organizational structure and create a larger public float, which is anticipated to result in enhanced trading liquidity, a lower cost of capital, improved consolidated credit metrics, and better access to, and cost of, debt financing. See the section titled “The Merger—Recommendations of the SunCoke Board and Its Reasons for the Merger.”

Questions and Answers Specific to SXCP Common Unitholders

Q. What SXCP Common Unitholder approval is required to adopt the Merger Agreement?

A. The approval and adoption of the Merger Agreement and the Merger by SXCP requires the affirmative vote or consent of holders of at least a majority of the outstanding SXCP Common Units. Pursuant to the terms of the Support Agreement, SC&C, a wholly owned subsidiary of SunCoke which as of February 4, 2019 beneficially owned 28,499,899 SXCP Common Units representing approximately 61.7% of the outstanding SXCP Common Units, has irrevocably agreed to deliver the SC&C Written Consent within two business days after the effectiveness of the registration statement of which this joint prospectus/consent statement/proxy statement forms a part. The delivery of the SC&C Written Consent by SC&C will be sufficient to adopt the Merger Agreement and thereby approve the Merger on behalf of SXCP. SXCP does not intend to hold a meeting of SXCP Common Unitholders to consider the Merger Agreement and the Merger.

 

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Q. Will SXCP Common Unitholders be entitled to give written consent with respect to the Merger?

A. The delivery of the SC&C Written Consent by SC&C will be sufficient to approve the Merger Agreement and the transactions contemplated thereby, including the Merger, on behalf of SXCP. As a result, no further action by any unitholder of SXCP is required under applicable law or otherwise to approve the Merger Agreement and the transactions contemplated thereby, including the Merger, and SXCP will not solicit the vote or consent of SXCP Public Unitholders for approval of the Merger Agreement or the transactions contemplated thereby, including the Merger, and will not call a special meeting of the SXCP Common Unitholders for purposes of voting on the approval of the Merger Agreement and the transactions contemplated thereby, including the Merger.

Q. Should SXCP Public Unitholders deliver their SXCP Common Units now?

A. No. After the Merger is completed, SXCP Public Unitholders who hold their SXCP Common Units in certificated or book entry form will receive written instructions for exchanging their SXCP Common Units. If you own SXCP Common Units in street name, the shares of SunCoke Common Stock you will receive in connection with the Merger should be credited to your account in accordance with the policies and procedures of your bank, broker or other nominee within a few days following the closing date of the Merger.

Q. What will SXCP Public Unitholders be entitled to receive in the Merger?

A. Each SXCP Public Unitholder will be entitled to receive SunCoke Common Stock in exchange for such holder’s SXCP Public Units at the Exchange Ratio. Each SXCP Public Unitholder will also be entitled to receive, with respect to each SXCP Public Unit held by such holder, a fraction of a share of SunCoke Common Stock equal to the product of (aa) the number of days beginning with the first day of the most recent full calendar quarter with respect to which an SXCP unitholder distribution record date has not occurred (or, if there is no such full calendar quarter, then beginning with the first day of the partial calendar quarter in which the Closing occurs), and ending on the day immediately prior to the Closing, multiplied by (bb) a daily distribution rate that is equal to the quotient of the most recent regular quarterly cash distribution paid by SXCP divided by 90, such product divided by $10.91, which was the closing price of the SunCoke Common Stock as of February 1, 2019, the last full trading day prior to the date of the execution of the Merger Agreement. For additional information regarding exchange procedures, please read “The Merger Agreement—Exchange of Units; Fractional Share Proceeds.”

Q. Where will SXCP Common Units trade after the Merger?

A. SXCP Common Units will no longer be publicly traded following the Merger and will be delisted from the NYSE.

Q. What happens to future distributions with respect to SXCP Public Units?

A. If the Merger is successfully consummated, all outstanding SXCP Public Units (i) will be converted into the right to receive the Merger Consideration and (ii) will no longer receive quarterly distributions from SXCP. For a description of the differences between the rights of holders of SunCoke Common Stock and holders of SXCP Common Units, please read “Comparison of the Rights of SunCoke Stockholders and SXCP Common Unitholders.”

Q. What will happen to SXCP’s outstanding senior notes and secured credit facility as a result of the Merger?

A. SXCP’s currently outstanding senior notes will remain outstanding after the Merger is completed, and no “change of control” will occur thereunder. SXCP’s currently outstanding secured credit facility will remain in effect after the Merger is completed, and no “change of control” will occur thereunder.

 

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Q. What are the expected U.S. federal income tax consequences to an SXCP Public Unitholder as a result of the Merger?

A. The receipt of SunCoke Common Stock and any cash in lieu of fractional shares of SunCoke Common Stock in exchange for SXCP Public Units pursuant to the Merger should be a taxable transaction to U.S. holders (as defined in the section titled “Material U.S. Federal Income Tax Consequences”) for U.S. federal income tax purposes. In such case, a U.S. holder will generally recognize capital gain or loss on the receipt of SunCoke Common Stock and any cash received in lieu of fractional shares of SunCoke Common Stock in exchange for SXCP Public Units. However, a portion of this gain or loss, which portion could be substantial, will be separately computed and taxed as ordinary income or loss to the extent attributable to assets giving rise to depreciation recapture or other “unrealized receivables” or to “inventory items” owned by SXCP and its subsidiaries. Passive losses that were not deductible by a U.S. holder in prior taxable periods because they exceeded a U.S. holder’s share of SXCP’s income may become available to offset a portion of the gain recognized by such U.S. holder. See the section titled “Material U.S. Federal Income Tax Consequences” for a more complete discussion of certain U.S. federal income tax consequences of the Merger.

Q. What are the expected U.S. federal income tax consequences for an SXCP Public Unitholder of the ownership of shares of SunCoke Common Stock after the Merger is completed?

A. SunCoke is classified as a corporation for U.S. federal income tax purposes, and thus, SunCoke (and not its stockholders) is subject to U.S. federal income tax on its taxable income. A distribution of cash by SunCoke to a stockholder who is a U.S. holder (as defined in the section titled “Material U.S. Federal Income Tax Consequences”) will generally be included in such U.S. holder’s income as ordinary dividend income to the extent of SunCoke’s current or accumulated “earnings and profits” as determined under U.S. federal income tax principles. Any portion of the cash distributed to SunCoke Stockholders by SunCoke after the Merger that exceeds SunCoke’s current and accumulated earnings and profits will be treated as a non-taxable return of capital reducing a U.S. holder’s adjusted tax basis in such U.S. holder’s shares of SunCoke Common Stock and, to the extent the distribution exceeds such stockholder’s adjusted tax basis, as capital gain from the sale or exchange of such shares of SunCoke Common Stock. See the section titled “Material U.S. Federal Income Tax Consequences” for a more complete discussion of certain U.S. federal income tax consequences of owning and disposing of shares of SunCoke Common Stock.

Q. Are SXCP Common Unitholders entitled to appraisal rights in connection with the Merger?

A. No. SXCP Common Unitholders do not have appraisal rights under applicable law or contractual appraisal rights under the SXCP Partnership Agreement or the Merger Agreement.

 

 

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SUMMARY

This summary highlights selected information in this joint prospectus/consent statement/proxy statement and does not contain all the information that may be important to you. To fully understand the Merger Agreement and the transactions contemplated thereby, including the Merger and the Parent Stock Issuance, and for a more complete description of the terms of the Merger Agreement, you should carefully read this entire joint prospectus/consent statement/proxy statement, including the annexes, as well as the documents incorporated by reference into this joint prospectus/consent statement/proxy statement, and the other documents to which you are referred. For information on how to obtain the documents that SunCoke and SXCP have filed with the SEC, see the section titled “Where You Can Find More Information.”

The Merger (page 29)

The SunCoke Parties and the SXCP Parties have agreed to merge Merger Sub, a wholly owned subsidiary of SunCoke, with and into SXCP, with SXCP being the surviving entity in the Merger as an indirect wholly owned subsidiary of SunCoke. In addition, if the Merger is successfully completed, SXCP Common Units will no longer be listed and traded on the NYSE.

The Merger Parties (page 84)

SunCoke

SunCoke is a Delaware corporation formed in 2010 and headquartered in Lisle, Illinois, that became a publicly-traded company in 2011. SunCoke is the largest independent producer of high-quality coke in the Americas, as measured by tons of coke produced each year and, through its predecessor entities, has approximately 55 years of coke production experience. Coke is a principal raw material in the blast furnace steelmaking process and is produced by heating metallurgical coal in a refractory oven, which releases certain volatile components from the coal, thus transforming the coal into coke. SunCoke’s cokemaking ovens combust the coal’s volatile components liberated during the cokemaking process, where the resulting heat can be used to create steam or electricity for sale. SunCoke also provides handling and/or mixing services to steel, coke (including some of SunCoke’s domestic cokemaking facilities), electric utility, coal producing and other manufacturing based customers. SunCoke owns the SXCP General Partner, which owns a 2.0% general partner interest and incentive distribution rights (“IDRs”) in SXCP, and owns a 60.4% limited partner interest in SXCP. The remaining 37.6% interest in SXCP is held by holders of SXCP Public Units (“SXCP Public Unitholders”).

SXCP

SXCP is a Delaware limited partnership formed by SunCoke in July 2012 to own and operate certain coke production facilities and logistics terminals. SXCP also provides coal handling and/or mixing services at its logistics terminals. SXCP licenses its advanced heat recovery cokemaking process from SunCoke. On January 24, 2013, SXCP completed the initial public offering of its common units representing limited partner interests in SXCP. SXCP operates and owns a 98% interest in three domestic cokemaking facilities and operates and owns four domestic logistics and coal handling terminals.

SC Energy Acquisition LLC

SC Energy Acquisition LLC, which is referred to in this joint prospectus/consent statement/proxy statement as Merger Sub, is a Delaware limited liability company and a wholly owned subsidiary of SunCoke. Merger Sub was formed on January 30, 2019, solely for the purpose of consummating the Merger and has no operating assets. Merger Sub has not carried on any activities to date, except for activities incidental to its formation and activities undertaken in connection with the Merger.



 

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Executive Offices of SunCoke, SXCP, and Merger Sub

The principal executive offices of SunCoke, SXCP and Merger Sub are located at 1011 Warrenville Road, Suite 600, Lisle, IL 60532. The telephone number of both of SunCoke and Merger Sub is (630) 824-1907 and the telephone number of SXCP is (630) 824-1987. The SunCoke website is located at http://www.suncoke.com/English/Home/default.aspx and the SXCP website is located at http://www.suncoke.com/English/investors/sxcp/overview/default.aspx.

SunCoke and SXCP each make available their periodic reports and other information filed with or furnished to the SEC, free of charge, through their respective websites, as soon as reasonably practicable after those reports and other information are electronically filed with or furnished to the SEC. Information on the foregoing websites or any other website is not incorporated by reference into this joint prospectus/consent statement/proxy statement and does not constitute a part of this joint prospectus/consent statement/proxy statement.

Required Approval of the Merger by the SXCP Common Unitholders

The approval and adoption of the Merger Agreement and the Merger by SXCP requires the affirmative vote or consent of holders of at least a majority of the outstanding SXCP Common Units. Pursuant to the terms of the Support Agreement, SC&C, which as of February 4, 2019 beneficially owned 28,499,899 SXCP Common Units representing approximately 61.7% of the outstanding SXCP Common Units, has irrevocably and unconditionally agreed to deliver the SC&C Written Consent adopting and approving in all respects the Merger Agreement and the transactions contemplated thereby, including the Merger, within two business days after the effectiveness of the registration statement of which this joint prospectus/consent statement/proxy statement forms a part. The delivery of the SC&C Written Consent by SC&C will be sufficient to approve the Merger Agreement and the transactions contemplated thereby, including the Merger, on behalf of SXCP. As a result, no further action by any unitholder of SXCP is required under applicable law or otherwise to approve the Merger Agreement and the transactions contemplated thereby, including the Merger, and SXCP will not solicit the vote or consent of SXCP Public Unitholders for approval of the Merger Agreement or the transactions contemplated thereby, including the Merger, and will not call a special meeting of the SXCP Common Unitholders for purposes of voting on the approval of the Merger Agreement and the transactions contemplated thereby, including the Merger.

SunCoke’s Ownership Interest in and Control of SXCP (page 29)

SunCoke holds a controlling ownership interest in SXCP. As of the date of this joint prospectus/consent statement/proxy statement, SunCoke controls SXCP through SunCoke’s indirect ownership of 100% of the membership interests of the SXCP General Partner, which owns 100% of the general partner interest in SXCP, and through SunCoke’s indirect ownership of approximately 61.7% of the outstanding SXCP Common Units.

Recommendations of the SXCP Conflicts Committee and the SXCP Board and Their Reasons for the Merger (page 37)

The SXCP Conflicts Committee by a unanimous vote at a meeting duly called and held on February 4, 2019, (i) determined that the Merger Agreement and the transactions contemplated thereby are in the best interest of SXCP, including the holders of SXCP Public Units, (ii) approved the Merger Agreement and the transactions contemplated thereby, including the Merger (the foregoing constituting SXCP Special Approval under the First Amended and Restated Agreement of Limited Partnership of SXCP dated as of January 24, 2013, as amended (the “SXCP Partnership Agreement”)), and (iii) recommended that the SXCP Board approve the Merger Agreement and the consummation of the transactions contemplated thereby, including the Merger. For a discussion of the many factors considered by the SXCP Conflicts Committee in making their determination and approval, please read “The Merger — Recommendations of the SXCP Conflicts Committee and the SXCP Board and Their Reasons for the Merger.”



 

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Based upon such approval and recommendation, at a meeting duly called and held on February 4, 2019, the SXCP Board (acting upon the recommendation of the SXCP Conflicts Committee) (i) determined that the Merger Agreement and the transactions contemplated thereby are in the best interest of SXCP, (b) approved the Merger Agreement and the transactions contemplated thereby, including the Merger, and (c) directed that the Merger Agreement be submitted to a vote of holders of SXCP Common Units (“SXCP Common Unitholders”) and authorized the SXCP Common Unitholders to act by written consent pursuant to Section 13.11 of the SXCP Partnership Agreement. For a further discussion of the recommendation of the SXCP Conflicts Committee to the SXCP Board, please read “The Merger — Recommendations of the SXCP Conflicts Committee and the SXCP Board and Their Reasons for the Merger.”

Opinion of the SXCP Conflicts Committee’s Financial Advisor (page 44)

In connection with the Merger, the SXCP Conflicts Committee’s financial advisor, Citigroup Global Markets Inc. (“Citi”), delivered a written opinion, dated February 4, 2019, to the SXCP Conflicts Committee as to the fairness, from a financial point of view and as of the date of the opinion, of the Exchange Ratio provided for pursuant to the Merger Agreement. The full text of Citi’s written opinion, dated February 4, 2019, which describes the assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken, is attached as Annex B to this joint prospectus/consent statement/proxy statement and is incorporated into this joint prospectus/consent statement/proxy statement by reference. The description of Citi’s opinion set forth below is qualified in its entirety by reference to the full text of Citi’s opinion. Citi’s opinion was provided for the information of the SXCP Conflicts Committee (in its capacity as such) in connection with its evaluation of the Exchange Ratio from a financial point of view and did not address any other terms, aspects or implications of the Merger. Citi expressed no view as to, and its opinion did not address, the underlying business decision of SXCP General Partner to effect or enter into the Merger, the relative merits of the Merger as compared to any alternative business strategies that might exist for SXCP or the effect of any other transaction which SXCP might engage in or consider. Citi’s opinion is not intended to be and does not constitute a recommendation to any securityholder as to how such securityholder should vote or act on any matters relating to the proposed Merger or otherwise. For a description of Citi’s opinion to the SXCP Conflicts Committee, see the section titled “The Merger—Opinion of the SXCP Conflicts Committee’s Financial Advisor.”

The SunCoke Special Meeting of Stockholders (page 25)

A special meeting of SunCoke’s Stockholders (the “SunCoke Special Meeting”) will be held on             , 2019 at                     , local time, at [the Hotel Arista, 2139 CityGate Lane, Naperville, Illinois 60563]. Only SunCoke Stockholders at the close of business on the SunCoke Vote Record Date are entitled to notice of, and to vote at, the SunCoke Special Meeting or any adjournment or postponement thereof. The approval of the Parent Stock Issuance Proposal requires the affirmative vote (in person or by proxy) of the holders of a majority of the aggregate voting power present at the SunCoke Special Meeting or any adjournment or postponement thereof, provided a quorum is present. See the section titled “The SunCoke Special Meeting of Stockholders.”

Recommendation of the SunCoke Board and Its Reasons for the Merger (page 54)

The Board of Directors of SunCoke (the “SunCoke Board”) considered the benefits of the Merger Agreement, including the Merger Transactions as well as the associated risks and, at a meeting duly called and held on February 4, 2019, (i) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger and the Parent Stock Issuance, are in the best interests of SunCoke and its stockholders, (ii) approved and declared advisable the Merger Agreement and the transactions contemplated thereby, including the Merger and the Parent Stock Issuance, and (iii) resolved to submit the Parent Stock Issuance to a vote of SunCoke’s stockholders and recommend approval of the Parent Stock Issuance at the SunCoke Special Meeting.



 

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For a discussion of many of the factors considered by the SunCoke Board in making its determination and approval, please read “The Merger—Recommendation of the SunCoke Board and Its Reasons for the Merger.”

Opinion of SunCoke’s Financial Advisor (page 55)

In connection with the proposed Merger, Evercore Group L.L.C. (“Evercore”) delivered a written opinion, dated as of February 4, 2019, to the SunCoke Board, as to the fairness, from a financial point of view and as of the date of the opinion, of the Exchange Ratio to SunCoke. The full text of the written opinion of Evercore, dated as of February 4, 2019, which sets forth, among other things, the factors, procedures, assumptions, qualifications and limitations on the scope of review undertaken in rendering its opinion, is attached hereto as Annex C to this joint prospectus/consent statement/proxy statement. You are urged to read Evercore’s opinion carefully and in its entirety. Evercore’s opinion was addressed to, and provided for the information and benefit of, the SunCoke Board in connection with its evaluation of the fairness of the Exchange Ratio from a financial point of view to SunCoke, and did not address any other aspects or implications of the Merger. Evercore’s opinion should not be construed as creating any fiduciary duty on Evercore’s part to any party and such opinion is not intended to be, and does not constitute, a recommendation to the SunCoke Board or to any other persons in respect of the Merger, including as to how any SunCoke Stockholder or SXCP unitholder should act or vote in respect of the Parent Stock Issuance Proposal or the Merger, as applicable. The summary of the Evercore opinion set forth herein is qualified in its entirety by reference to the full text of the opinion included as Annex C.

For a description of the opinion that the SunCoke Board received from Evercore, see the section titled “The Merger—Opinion of SunCoke’s Financial Advisor.”

Interests of Certain Persons in the Merger Transactions (page 66)

In considering the recommendations of the SXCP Conflicts Committee and of the SXCP Board, SXCP Common Unitholders should be aware that the executive officers and directors of the SXCP General Partner have interests in the Merger Transactions that may differ from, or may be in addition to, the interests of SXCP Common Unitholders generally. These interests include:

 

   

The executive officers of the SXCP General Partner are also executive officers of SunCoke, and two of the directors of the SXCP Board are also directors of the SunCoke Board.

 

   

The directors (including the members of the SXCP Conflicts Committee) and officers of the SXCP General Partner are entitled to continued indemnification (including advancement of expenses) and insurance coverage under the Merger Agreement.

 

   

Certain of the executive officers and directors of the SXCP General Partner beneficially own SXCP Common Units (including, in the case of certain directors, interests in a deferred compensation plan which contains deemed investments in SXCP Common Units), and these executive officers and directors will receive the Merger Consideration upon completion of the Merger for each SXCP Common Unit they hold (and any deferred compensation right deemed invested in SXCP Common Units will be deemed invested in the Merger Consideration).

 

   

Certain of the executive officers and directors of the SXCP General Partner beneficially own shares of SunCoke Common Stock.



 

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In considering the recommendations of the SunCoke Board, SunCoke Stockholders should be aware that the executive officers and directors of SunCoke have interests in the Merger Transactions that may differ from, or may be in addition to, the interests of SunCoke Stockholders generally. These interests include:

 

   

The executive officers of SunCoke are also executive officers of the SXCP General Partner, and two of the directors of SunCoke are also directors of the SXCP General Partner.

 

   

Certain of the executive officers and directors of SunCoke beneficially own SXCP Common Units, and these executive officers and directors will receive the Merger Consideration upon completion of the Merger for each SXCP Common Unit they hold.

Market Price and Cash Distribution Information (page 18)

SXCP Common Units are listed on the NYSE under the symbol “SXCP.” SunCoke Common Stock is listed on the NYSE under the symbol “SXC.”

The following table shows the closing sale prices of SXCP Common Units and SunCoke Common Stock as reported on the NYSE on February 4, 2019, the last full trading day prior to the public announcement of the proposed Merger, and on March 7, 2019, the last practicable trading day prior to the filing date of this joint prospectus/consent statement/proxy statement. This table also shows the value of a SXCP Public Unit implied by the Exchange Ratio being offered, calculated by multiplying the relevant price of a share of SunCoke Common Stock by the 1.40 Exchange Ratio.

 

     SunCoke      SXCP      Implied Value of
One SXCP
Public Unit
 

February 4, 2019

   $ 10.93      $ 14.00      $ 15.30  

March 7, 2019

   $ 9.00    $ 13.16      $ 12.60  

The Merger Agreement (page 72)

The Merger Agreement is attached to this joint prospectus/consent statement/proxy statement as Annex A and is incorporated by reference into this joint prospectus/consent statement/proxy statement. You are encouraged to read the Merger Agreement carefully and in its entirety because it is the legal document that governs the Merger. For a summary of the material terms of the Merger Agreement, please read the section titled “The Merger Agreement.”

Structure of the Merger

Pursuant to the terms of the Merger Agreement, at the effective time of the Merger, Merger Sub will merge with and into SXCP, with SXCP being the surviving entity in the Merger as an indirect wholly owned subsidiary of SunCoke.

When the Merger Becomes Effective

Concurrently with or as soon as practicable following the satisfaction or waiver of all of the conditions to completing the Merger, SunCoke and SXCP will cause a duly executed certificate of merger effecting the Merger to be filed with the Secretary of State of the State of Delaware. The Merger will become effective at the time and on the date on which the certificate of merger is filed or, if agreed to by the parties, such later time and date as may be expressed in the certificate of merger. This time is referred to as the “effective time of the Merger.”



 

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Effect of the Merger

At the effective time of the Merger:

 

   

Each SXCP Public Unit outstanding immediately prior to the effective time of the Merger will be converted into the right to receive the Merger Consideration.

 

   

Each SXCP Public Unit, upon being converted into the right to receive the Merger Consideration, will cease to be outstanding and will be canceled and retired and will cease to exist and each holder of such SXCP Public Unit immediately prior to the effective time of the Merger will thereafter cease to be a limited partner of SXCP or have any rights with respect to any such SXCP Public Units except the right to receive the Merger Consideration and any dividends and other distributions described in the Merger Agreement.

 

   

All SXCP general partner interests, SXCP IDRs, and SXCP Common Units that are not SXCP Public Units will, in each case, remain outstanding as partnership interests in the surviving entity, unaffected by the Merger.

 

   

The limited liability company interests in Merger Sub issued and outstanding immediately prior to the effective time of the Merger will be converted into the right to receive an aggregate number of common units of the surviving entity equal to the number of SXCP Public Units that are converted into the right to receive the Merger Consideration pursuant to the Merger.

If, before the effective time of the Merger, the number of outstanding SXCP Common Units or shares of SunCoke Common Stock will be changed into a different number of units, shares or other securities, by reason of any dividend or distribution payable in partnership interests, voting securities, equity interests or rights, subdivision, reclassification, split, split-up, combination, merger, consolidation, reorganization, exchange or other similar transaction, then the Merger Consideration, and any other similarly dependent items will be appropriately adjusted to reflect fully the effect of such transaction and to provide SXCP, Merger Sub and SXCP Public Units the same economic effect as contemplated by the Merger Agreement prior to such event.

For a description of the SXCP Common Units and the SunCoke Common Stock and a description of the comparative rights of SXCP Common Unitholders and SunCoke Stockholders, please read “Comparison of the Rights of SunCoke Stockholders and SXCP Common Unitholders” and “Description of SunCoke Common Stock.”

Conditions to the Merger

The obligation of the parties to the Merger Agreement to complete the Merger is subject to the satisfaction or waiver of certain conditions, including, among others:

 

   

the approval and adoption of the Merger Agreement and the transactions contemplated thereby, including the Merger, by holders of at least a majority of the outstanding SXCP Common Units;

 

   

the absence of legal injunctions prohibiting the transactions contemplated by the Merger Agreement;

 

   

the effectiveness of a Registration Statement on Form S-4 with respect to the Parent Stock Issuance;

 

   

the approval of the listing on the New York Stock Exchange, subject to official notice of issuance, of the SunCoke Common Stock to be issued in the Merger;

 

   

the affirmative vote of the holders of a majority of the votes cast at the SunCoke Special Meeting or any adjournment or postponement thereof to approve the Parent Stock Issuance;

 

   

the receipt of all governmental consents and approvals, the absence of which would, individually or in the aggregate, have a material adverse effect on either SunCoke or SXCP; and



 

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the clearing of this joint prospectus/consent statement/proxy statement by the SEC and the mailing of such to holders of SunCoke Common Stock and SXCP Common Units.

The parties’ obligations are also separately subject to the satisfaction or waiver of the following conditions:

 

   

certain fundamental representations and warranties of the other party relating to organization and existence, authorization to execute and deliver the Merger Agreement and to consummate the transactions contemplated thereby and, in the case of SunCoke only, capitalization of SunCoke shall be true and correct in all material respects as of the Closing (as defined in the Merger Agreement);

 

   

the representations and warranties of the other party relating to the absence of an occurrence or event which has had a material adverse effect on such party shall be true and correct as of the Closing;

 

   

all agreements and covenants required to be performed by the other party that have materiality, “Parent Material Adverse Effect,” “SXCP Material Adverse Effect” or similar qualifiers shall have been performed or complied with, and all other agreements and covenants required to be performed by the other party that are not so qualified shall have been performed or complied with in all material respects; and

 

   

the other party has delivered a certificate of an executive officer of such party certifying that the preceding conditions have been satisfied.

SunCoke Board Recommendation and SunCoke Adverse Recommendation Change

On February 4, 2019, the SunCoke Board determined that the Merger Agreement and the transactions contemplated thereby, including the Merger and the Parent Stock Issuance, are in the best interests of SunCoke and the SunCoke Stockholders, approved and declared advisable the Merger Agreement and the transactions contemplated thereby, including the Merger and the Parent Stock Issuance, and resolved to submit the Parent Stock Issuance to a vote of SunCoke Stockholders and recommend approval of the Parent Stock Issuance at the SunCoke Special Meeting.

Subject to the exceptions described below, the Merger Agreement provides that SunCoke will not, through the SunCoke Board:

 

   

withdraw, modify or qualify, or propose publicly to withdraw, modify or qualify, in a manner adverse to SXCP, the SunCoke Board’s recommendation to approve the Parent Stock Issuance at the SunCoke Special Meeting (such recommendation, the “SunCoke Board Recommendation”); or

 

   

fail to include the SunCoke Board Recommendation in this joint prospectus/consent statement/proxy statement.

SunCoke taking any of the actions described above is referred to as a “SunCoke Adverse Recommendation Change.”

Subject to the conditions described below, the SunCoke Board may, at any time prior to the SunCoke Stockholders approving the Parent Stock Issuance, effect a SunCoke Adverse Recommendation Change if the SunCoke Board determines in good faith (after consultation with SunCoke’s financial advisor and outside legal counsel) that the failure to take such action would be inconsistent with its fiduciary duties to the SunCoke Stockholders under applicable law.

Pursuant to the Merger Agreement, the SunCoke Board (i) is not permitted to make a SunCoke Adverse Recommendation Change in response to a SunCoke Acquisition Proposal that does not constitute a SunCoke Designated Proposal (each as defined below) and (ii) may not effect a SunCoke Adverse Recommendation Change unless:

 

   

SunCoke has provided prior written notice to the SXCP Conflicts Committee specifying in reasonable detail the reasons for such action (including, in the case of a SunCoke Designated Proposal, a description of the



 

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material terms of such SunCoke Designated Proposal and complete copies of any written proposals, offers and/or draft definitive agreements in connection therewith) at least three days in advance of its intention to take such action with respect to a SunCoke Adverse Recommendation Change, unless at the time such notice is required to be given there are less than three days remaining prior to the SunCoke Special Meeting, in which case SunCoke is required to provide as much notice as is reasonably practicable (the period inclusive of all such days, the “SunCoke Notice Period”); and

 

   

during the SunCoke Notice Period the SunCoke Board has negotiated, and has used reasonable best efforts to cause its financial advisor and outside legal counsel to negotiate, with the SXCP Conflicts Committee in good faith (to the extent the SXCP Conflicts Committee desires to negotiate) to make such adjustments in the terms and conditions of the Merger Agreement so that the failure to effect such SunCoke Adverse Recommendation Change would not be inconsistent with the fiduciary duties of the SunCoke Board to SunCoke Stockholders under applicable law (provided that any material amendment to the terms of a SunCoke Designated Proposal, if applicable, will require a new notice as described above and a new SunCoke Notice Period, except that such new SunCoke Notice Period in connection with any material amendment will be for one business day from the time SXCP receives such notice (as opposed to three days)).

For purposes of the Merger Agreement:

 

   

the term “SunCoke Acquisition Proposal” means any inquiry, proposal or offer from any person or “group” (as defined in Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), other than the SXCP Parties or any subsidiaries of SXCP, relating to any:

 

   

direct or indirect acquisition (whether in a single transaction or a series of related transactions), outside of the ordinary course of business, of assets of SunCoke and its partially or wholly owned subsidiaries, excluding the SXCP Parties and any subsidiaries of SXCP, (including securities of SunCoke subsidiaries) equal to 25% or more of the assets (based on fair market value) of SunCoke and its partially or wholly owned subsidiaries, excluding the SXCP Parties and any subsidiaries of SXCP, taken as a whole, or to which 25% or more of the revenues or earnings (for the twelve-month period ending on the last day of SunCoke’s most recently completed fiscal quarter) of SunCoke and its partially or wholly owned subsidiaries, excluding the SXCP Parties and any subsidiaries of SXCP, taken as a whole, are attributable;

 

   

direct or indirect acquisition (whether in a single transaction or a series of related transactions) of beneficial ownership (within the meaning of Section 13(d) under the Exchange Act) of 25% or more of any outstanding class of equity securities of SunCoke;

 

   

tender offer or exchange offer that if consummated would result in any person or “group” (as defined in Section 13(d) of the Exchange Act) beneficially owning 25% or more any outstanding class of equity securities of SunCoke; or

 

   

merger, consolidation, unit exchange, share exchange, business combination, recapitalization, liquidation, dissolution or similar transaction (whether in a single transaction or a series of related transactions) involving SunCoke which is structured to permit such person or group to acquire beneficial ownership of at least 25% of SunCoke’s consolidated assets or any class of outstanding equity interests.

 

   

the term “SunCoke Designated Proposal” means a bona fide written SunCoke Acquisition Proposal obtained after the date of the Merger Agreement, which is on terms and conditions which the SunCoke Board has determined in its good faith judgment is reasonably likely to be more favorable to the SunCoke Stockholders from a financial point of view than the transactions contemplated by the Merger Agreement, taking into account all financial, legal, financing, regulatory and other aspects of such offer and any changes to the terms of the Merger Agreement that as of the time of determination had been committed to by SXCP and the SunCoke in writing (provided that for purposes of the definition of “SunCoke Designated Proposal,” references in the term “SunCoke Acquisition Proposal” to “25%” will be deemed to be references to “50%”).



 

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Termination

The Merger Agreement may be terminated at any time prior to the effective time of the Merger by the mutual written agreement of the parties thereto duly authorized by the SunCoke Board, on behalf of SunCoke, and by the SXCP Conflicts Committee, on behalf of SXCP. In addition, either of SXCP or SunCoke may terminate the Merger Agreement on its own prior to the effective time of the Merger if:

 

   

the Merger has not been consummated on or before September 30, 2019 (the “Termination Date”), provided that this right to terminate the Merger Agreement will not be available to the party seeking to terminate if such party failed to perform or observe in any material respect its obligations under the Merger Agreement in any manner that will have been the principal cause of, or resulted in, the failure of the Merger to occur on or before such date;

 

   

a governmental entity has issued an order, decree or ruling or taken any other action (including the enactment of any statute, rule, regulation, decree or executive order) permanently restraining, enjoining or otherwise prohibiting the Merger and such order, decree, ruling or other action (including the enactment of any statute, rule, regulation, decree or executive order) will have become final and non-appealable, provided that the party seeking to terminate the Merger Agreement has complied with its obligations under the Merger Agreement regarding certain filings, the SunCoke Special Meeting, the SunCoke Board Recommendation, commercially reasonable efforts to cause the Merger to occur, and other further assurances;

 

   

the other party breaches or fails to perform any of its representations, warranties, covenants or agreements in the Merger Agreement (or if any of the other party’s representations or warranties will fail to be true), or, in the case of SunCoke, if SC&C breaches or fails to perform any of its representations, warranties, covenants or agreements set forth in the Support Agreement, in each case, which breach or failure (i) would (if it occurred or was continuing as of the closing of the Merger) give rise to the failure of a condition to the Merger being satisfied, and (ii) is incapable of being cured, or is not cured, prior to the Termination Date, provided that the party seeking termination is not in breach of its representations and warranties under the Merger Agreement so as to give rise to a failure of the condition to the other party’s obligation to close under the Merger Agreement;

 

   

the Parent Stock Issuance Approval has not been obtained upon the conclusion of the SunCoke Special Meeting (it being understood by SXCP that SunCoke is permitted to terminate in such circumstance even where failure to obtain Parent Stock Issuance Approval is proximately caused by a withdrawal, modification, or qualification of the SunCoke Board Recommendation whether or not permitted by the Merger Agreement); or

 

   

a SunCoke Adverse Recommendation Change occurs.

Comparison of the Rights of SunCoke Stockholders and SXCP Common Unitholders (page 85)

SunCoke is a Delaware corporation and SXCP is a Delaware limited partnership, and there are significant differences under applicable Delaware state law in the rights of SunCoke Stockholders and SXCP Common Unitholders. For more information concerning these differences, please read “Comparison of the Rights of SunCoke Stockholders and SXCP Common Unitholders,” beginning at page 85.

Material U.S. Federal Income Tax Consequences (page 105)

The receipt of SunCoke Common Stock and any cash in lieu of fractional shares of SunCoke Common Stock in exchange for SXCP Public Units pursuant to the Merger should be a taxable transaction to U.S. holders (as defined in the section titled “Material U.S. Federal Income Tax Consequences”) for U.S. federal income tax purposes.



 

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In such case, a U.S. holder who receives SunCoke Common Stock and cash in lieu of fractional shares of SunCoke Common Stock in exchange for SXCP Public Units pursuant to the Merger will recognize gain or loss in an amount equal to the difference between:

 

   

the sum of (i) the fair market value of SunCoke Common Stock received, (ii) the amount of any cash received in lieu of fractional shares of SunCoke Common Stock, and (iii) such U.S. holder’s share of SXCP’s nonrecourse liabilities immediately prior to the Merger; and

 

   

such U.S. holder’s adjusted tax basis in the SXCP Public Units exchanged therefor (which includes such U.S. holder’s share of SXCP’s nonrecourse liabilities immediately prior to the Merger).

Gain or loss recognized by a U.S. holder will generally be taxable as capital gain or loss. However, a portion of this gain or loss, which portion could be substantial, will be separately computed and taxed as ordinary income or loss under Section 751 of the Code to the extent attributable to assets giving rise to depreciation recapture or other “unrealized receivables” or to “inventory items” owned by SXCP and its subsidiaries. Passive losses that were not deductible by a U.S. holder in prior taxable periods because they exceeded a U.S. holder’s share of SXCP’s income may become available to offset a portion of the gain recognized by such U.S. holder.

The U.S. federal income tax consequences of the Merger to an SXCP Common Unitholder will depend on such unitholder’s own personal tax situation. Accordingly, you are strongly urged to consult your tax advisor for a full understanding of the particular tax consequences of the Merger to you.

For additional information, read the section titled “Material U.S. Federal Income Tax Consequences.”

Other Information Related to the Merger

No Appraisal Rights (page 70)

Neither the SXCP Common Unitholders nor the SunCoke Stockholders have appraisal rights in connection with the Merger under applicable law. In addition, (i) SXCP Common Unitholders do not have contractual appraisal rights under the SXCP Partnership Agreement or the Merger Agreement and (ii) SunCoke Stockholders do not have contractual appraisal rights under the amended and restated certificate of incorporation of SunCoke (the “SunCoke Certificate”) or the amended and restated bylaws of SunCoke (the “SunCoke Bylaws,” and together with the SunCoke Certificate, the “SunCoke Organizational Documents”).

Regulatory Matters (page 70)

In connection with the Merger, SunCoke and SXCP intend to make all required filings under the Securities Act of 1933, as amended (the “Securities Act”) and the Exchange Act, as well as any required filings or applications with the NYSE and the Secretary of State of the State of Delaware. SunCoke and SXCP are unaware of any other requirement for the filing of information with, or the obtaining of the approval of, governmental authorities in any jurisdiction that is applicable to the Merger.

The Merger is not reportable under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), and therefore no filings with respect to the Merger were required with the Federal Trade Commission (the “FTC”) or the Antitrust Division of the Department of Justice (the “DOJ”).

Listing of the SunCoke Common Stock to be Issued in the Merger (page 70)

SunCoke expects to obtain approval to list the SunCoke Common Stock to be issued pursuant to the Merger Agreement on the NYSE, which approval is a condition to the Closing.



 

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Accounting Treatment (page 71)

The Merger will be accounted for in accordance with Financial Accounting Standards Board Accounting Standards Codification (ASC) 810, Consolidation—Overall—Changes in a Parent’s Ownership Interest in a Subsidiary (ASC 810). Because SunCoke controls SXCP both before and after the Merger, the changes in SunCoke’s ownership interest in SXCP will be accounted for as an equity transaction. SunCoke’s costs will be recognized as an adjustment to additional paid-in capital, net of estimated tax benefit, upon exchange of securities at Closing, consistent with SunCoke’s historical accounting policy election. Transaction costs incurred by SXCP will be expensed in the consolidated statement of income as incurred. In addition, the tax effect of the Merger will be presented in additional paid-in capital consistent with ASC 740, Income Taxes (ASC 740). Since the SunCoke historical financial information includes the accounts of SXCP, the historical financial information of SXCP has not been shown separately. SunCoke will apply its historical accounting policies and recognize the assets and liabilities of SXCP at their respective historical values as of the closing date of the Merger.

Summary of Risk Factors

You should consider carefully all the risk factors together with all of the other information included in this joint prospectus/consent statement/proxy statement before deciding how to vote (in the case of SunCoke Stockholders). Some of these risks include, but are not limited to, those described below and in more detail under the headings “Risk Factors—Risks Related to the Merger,” “Risk Factors—Tax Risks Related to the Merger and the Ownership of SunCoke Common Stock Received in the Merger” and “Risk Factors—Risks Inherent in an Investment in SunCoke”:

 

   

The Merger is subject to closing conditions that, if not satisfied or waived, will result in the Merger not being consummated, which may cause the market price of SXCP Common Units and/or SunCoke Common Stock to decline.

 

   

Financial projections regarding SunCoke and SXCP may not be realized.

 

   

The unaudited pro forma financial statements included in this joint prospectus/consent statement/proxy statement are presented for illustrative purposes only and may not be an indication of the combined entity’s financial condition or results of operations following the Merger.

 

   

The number of shares of SunCoke Common Stock that SXCP Public Unitholders will be entitled to receive in the Merger is based upon the Exchange Ratio, which is a fixed exchange ratio. As a result, the market value of the shares of SunCoke Common Stock that SXCP Public Unitholders receive for their SXCP Public Units in the Merger could decrease prior to the consummation of the Merger.

 

   

The SXCP Partnership Agreement limits the duties of the SXCP General Partner to SXCP Common Unitholders and restricts the remedies available to SXCP Common Unitholders for actions taken by the SXCP General Partner that might otherwise constitute breaches of its duties.

 

   

The executive officers and directors of SunCoke may have interests that differ in certain respects from those of the SunCoke Stockholders.

 

   

SunCoke and SXCP will incur transaction-related costs in connection with the Merger.

 

   

Under the Merger Agreement, if the Merger Agreement is terminated under certain specified circumstances, SunCoke would be required to pay SXCP’s expenses and, under certain circumstances, a termination fee.

 

   

SXCP has no ability to enter into a transaction that is not approved by the SXCP General Partner, which is controlled by SunCoke.

 

   

The Merger should be a taxable transaction and, in such case, the resulting tax liability of an SXCP Public Unitholder, if any, will depend on such unitholder’s particular situation.



 

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The tax liability of an SXCP Public Unitholder as a result of the Merger could be more than expected.

 

   

The U.S. federal income tax treatment to SXCP Public Unitholders with respect to owning and disposing of any shares of SunCoke Common Stock received in the Merger will be different than their U.S. federal income tax treatment with respect to owning and disposing of their SXCP Public Units.

 

   

The SunCoke Common Stock to be received by SXCP Public Unitholders as a result of the Merger has different rights from SXCP Common Units.

 

   

SunCoke may only declare and pay dividends in accordance with the General Corporation Law of the State of Delaware.

 

   

The price of SunCoke Common Stock may be volatile, and holders of SunCoke Common Stock could lose a significant portion of their assets.

In addition, both SunCoke and SXCP are subject to various risks associated with their respective businesses. Please carefully read this joint prospectus/consent statement/proxy statement, the documents incorporated herein by reference and the documents to which you are referred. See the section titled “Risk Factors” beginning on page 19.



 

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SELECTED HISTORICAL AND

PRO FORMA FINANCIAL INFORMATION OF SUNCOKE AND SXCP

The following tables set forth, for the periods and at the dates indicated, selected historical financial and operating information for SunCoke and SXCP and selected unaudited pro forma financial information for SunCoke after giving effect to the proposed Merger.

The selected historical financial and operating information presented for SunCoke as of December 31, 2018 and 2017 and for each of the years ended December 31, 2018, 2017 and 2016, was derived from the audited consolidated financial statements of SunCoke included in SunCoke’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, which is incorporated by reference in this joint prospectus/consent statement/proxy statement. Historical consolidated financial data as of December 31, 2016, 2015 and 2014 and for each of the years ended December 31, 2015 and 2014 are derived from SunCoke’s consolidated financial statements not incorporated by reference into this joint prospectus/consent statement/proxy statement. It should not be assumed the results of operations for any past period indicate results for any future period.

The selected historical financial information presented for SXCP as of December 31, 2018 and 2017 and for each of the years ended December 31, 2018, 2017 and 2016, was derived from the audited consolidated financial statements of SXCP included in SXCP’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, which is incorporated by reference in this joint prospectus/consent statement/proxy statement. Historical consolidated financial data as of December 31, 2016, 2015 and 2014 and for each of the years ended December 31, 2015 and 2014 are derived from SXCP’s consolidated financial statements not incorporated by reference into this joint prospectus/consent statement/proxy statement. It should not be assumed the results of operations for any past period indicate results for any future period.

You should read the financial information with respect to SunCoke presented below in conjunction with the historical consolidated financial statements, the related notes, and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in SunCoke’s Annual Report on Form 10-K for the year ended December 31, 2018. You should read the financial information with respect to SXCP presented below in conjunction with the historical consolidated financial statements, the related notes, and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in SXCP’s Annual Report on Form 10-K for the year ended December 31, 2018. See the section titled “Documents Incorporated by Reference.”

The selected unaudited pro forma financial information shows the pro forma effect of SunCoke’s acquisition of the publicly held noncontrolling interest in SXCP as a result of the Merger and has been provided to assist in the analysis of the financial effects of the Merger. The selected unaudited pro forma condensed consolidated financial statements of SunCoke, from which the selected unaudited pro forma financial information is derived, are presented beginning on page F-2 of this document. The unaudited pro forma condensed consolidated statement of income for the year ended December 31, 2018 assumes the Merger occurred on January 1, 2018. The unaudited pro forma condensed consolidated balance sheet as of December 31, 2018 assumes the Merger occurred on December 31, 2018. The unaudited pro forma condensed consolidated financial statements are provided for illustrative purposes only and do not purport to represent what SunCoke’s actual results of operations or financial position would have been if the Merger had occurred on the dates assumed, nor are they necessarily indicative of SunCoke’s future operating results or financial position. However, the pro forma adjustments shown in the unaudited pro forma condensed consolidated financial statements reflect estimates and assumptions that SunCoke management believes to be reasonable. For a complete discussion of the pro forma adjustments underlying the amounts in the tables below, please read “Unaudited Pro Forma Condensed Consolidated Financial Statements” beginning on page F-2 of this document.

 

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Selected Historical and Pro Forma Financial Information of SunCoke

 

     SunCoke Historical     Pro Forma  
     Years Ended December 31,     For the Year
Ended
December 31,
2018
 
     2018(1)      2017(1)      2016(1)      2015(1)     2014  
     (Dollars in millions, except per share amounts)        

Operating Results:

               

Total revenues

   $ 1,450.9      $ 1,331.5      $ 1,223.3      $ 1,362.7     $ 1,503.8     $ 1,450.9  

Operating income (loss)(2)

   $ 118.7      $ 104.2      $ 97.9      $ 76.6     $ (67.8   $ 121.1  

Net income (loss)(3)(4)

   $ 47.0      $ 103.5      $ 59.5      $ 10.3     $ (101.8   $ 44.0  

Net income (loss) attributable to SunCoke Energy, Inc.

   $ 26.2      $ 122.4      $ 14.4      $ (22.0   $ (126.1   $ 44.8  

Earnings (loss) attributable to SunCoke Energy, Inc. per common share:

               

Basic

   $ 0.40      $ 1.90      $ 0.22      $ (0.34   $ (1.83   $ 0.50  

Diluted

   $ 0.40      $ 1.88      $ 0.22      $ (0.34   $ (1.83   $ 0.50  

Dividends paid per share

   $ —        $ —        $ —        $ 0.4335     $ 0.0585     $ 0.3170  

Balance Sheet Data (at period end):

               

Total assets

   $ 2,045.3      $ 2,060.1      $ 2,120.9      $ 2,255.5     $ 1,959.7     $ 2,044.8  

Long-term debt and financing obligation

   $ 834.5      $ 861.1      $ 849.2      $ 997.7     $ 633.5     $ 834.5  

 

(1)

The results of Convent Marine Terminal (“CMT”) have been included in the consolidated financial statements since it was acquired on August 12, 2015. CMT added the following:

 

     Years Ended December 31,  
     2018      2017      2016      2015  
     (Dollars in millions)  

Combined assets

   $ 370.9      $ 394.6      $ 411.7      $ 426.1  

Revenue

   $ 81.3      $ 71.1      $ 62.7      $ 28.6  

Operating income

   $ 40.2      $ 42.3      $ 46.5      $ 18.4  

 

(2)

In April 2016, SunCoke recorded losses related to the divestiture of its coal mining business to Revelation Energy, LLC of $14.7 million. During 2014, SunCoke recorded total impairment charges related to SunCoke’s coal mining business of $150.3 million, which included both long-lived asset and goodwill impairment charges.

(3)

On June 27, 2018, SunCoke sold its investment in VISA SunCoke Limited (“VISA SunCoke”), resulting in a net $5.4 million loss from equity method investment. During 2015 and 2014, SunCoke recorded other-than-temporary impairment charges on SunCoke’s investment in VISA SunCoke of $19.4 million and $30.5 million, respectively.

(4)

During 2017, SunCoke recorded $154.7 million of net tax benefits, $125.0 million of which were attributable to SunCoke, related to the new Tax Cuts and Jobs Act (the “Tax Legislation”). Additionally, during 2017, SunCoke recorded deferred income tax expense of $64.2 million, all of which was attributable to noncontrolling interest, related to the final regulations on qualifying income.

 

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Selected Historical Financial Information of SXCP

 

     Years Ended December 31,  
     2018(1)      2017(1)     2016(1)      2015(1)      2014  
     (Dollars in millions, except per unit amounts)  

Operating Results:

             

Total revenues

   $ 892.1      $ 845.6     $ 779.7      $ 838.5      $ 873.0  

Operating income

   $ 117.2      $ 142.8     $ 146.1      $ 137.2      $ 135.1  

Net income (loss)(2)

   $ 59.4      $ (17.5   $ 121.4      $ 92.2      $ 87.5  

Net income (loss) attributable to SunCoke Energy Partners, L.P.

   $ 57.5      $ (18.1   $ 119.1      $ 85.4      $ 56.0  

Net income (loss) per common unit (basic and diluted)

   $ 1.22      $ (0.54   $ 2.07      $ 1.92      $ 1.58  

Net income per subordinated unit (basic and diluted)(3)

   $ —        $ —       $ —        $ 1.71      $ 1.43  

Distributions declared per unit

   $ 1.6000      $ 2.3760     $ 2.3760      $ 2.2888      $ 2.0175  

Balance Sheet Data (at period end):

             

Total assets

   $ 1,619.1      $ 1,641.4     $ 1,696.0      $ 1,768.9      $ 1,417.0  

Long-term debt and financing obligation

   $ 793.3      $ 818.4     $ 805.7      $ 894.5      $ 399.0  

 

(1)

The results of CMT have been included in the consolidated financial statements since it was acquired on August 12, 2015. CMT added the following:

 

     Years Ended December 31,  
     2018      2017      2016      2015  
     (Dollars in millions)  

Combined assets

   $ 370.9      $ 394.6      $ 411.7      $ 426.1  

Revenues

   $ 81.3      $ 71.1      $ 62.7      $ 28.6  

Operating income

   $ 40.2      $ 42.3      $ 46.5      $ 18.4  

 

(2)

In 2017, as a result of the final regulations on qualifying income and the new Tax Legislation, SXCP recorded deferred income tax expense, net of $79.8 million.

(3)

Upon payment of the cash distribution for the fourth quarter of 2015, the financial requirements for the conversion of all subordinated units were satisfied. As a result, the 15,709,697 subordinated units converted into common units on a one-for-one basis. For the purpose of calculating net income per unit, the conversion of the subordinated units is deemed to have occurred on January 1, 2016.

 

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COMPARATIVE AND PRO FORMA PER SHARE/UNIT DATA

The following table presents SunCoke’s and SXCP’s historical per share/unit data, per share pro forma data for SunCoke and equivalent per unit pro forma data for SXCP, using certain assumptions as set forth in the footnotes to the table. The data do not purport to be indicative of: (1) the results of operations or financial position which would have been achieved if the Merger had been effected at the beginning of the period or as of the date indicated or (2) the results of operations or financial position that may be achieved in the future.

 

     Year Ended
December 31, 2018
 

Historical SunCoke

  

Income from continuing operations per share—basic

   $ 0.40      

Income from continuing operations per share—diluted

   $ 0.40      

Dividends per share declared in the period

   $ —        

Book value per share (a)

   $ 7.15      

Historical SXCP

  

Limited partners’ net income per common unit (basic and diluted)

   $ 1.22      

Distributions per unit declared in the period

   $ 1.60      

Book value per unit (b)

   $ 12.61      

SunCoke pro forma

  

Income from continuing operations per share—
basic (c)

   $ 0.50      

Income from continuing operations per share—diluted (c)

   $ 0.50      

Dividends per share declared in the period (d)

   $ 0.3170  

Book value per share (e)

   $ 7.88      

SXCP equivalent pro forma (f)

  

Income from continuing operations per share—basic

   $ 0.70      

Income from continuing operations per share—diluted

   $ 0.70      

Dividends per share declared in the period

   $ 0.45      

Book value per share

   $ 11.03      

 

(a)

SunCoke historical book value per unit calculated as follows (in millions, except per share amounts):

 

     December 31, 2018  

Equity before noncontrolling interest

   $   463.1  

Divided by: Number of shares outstanding as of period end

     64.8  
  

 

 

 

Book value per share

   $ 7.15  
  

 

 

 

 

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(b)

SXCP historical book value per unit calculated as follows (in millions, except per share amounts):

 

     December 31, 2018  

Equity before noncontrolling interest

   $ 595.0  

Divided by: Number of units outstanding as of period end (includes Notional General Partner units representing the 2% general partner interests)

     47.2  
  

 

 

 

Book value per unit

   $ 12.61  
  

 

 

 

 

(c)

Amounts are from the unaudited pro forma condensed consolidated financial statements included under “Unaudited Pro Forma Condensed Consolidated Financial Statements.”

(d)

Pro forma dividends declared were calculated as follows (in millions, except per share amounts):

 

     Year Ended
December 31, 2018
 

SXCP’s distributions declared for the period for public limited common unitholders

   $ 28.4  

Divided by: Pro forma combined number of shares outstanding as of date of record

     89.6  
  

 

 

 

Pro forma dividends per share declared for the period

   $ 0.3170  
  

 

 

 

 

     SunCoke      SXCP      Total  

Number of public shares/units outstanding as of the record date

     64.8        17.7     

Fixed Exchange Ratio

        1.40     
  

 

 

    

 

 

    

 

 

 

Number of public shares outstanding as of the record date (pro forma)

     64.8        24.8        89.6  
  

 

 

    

 

 

    

 

 

 

SunCoke management intends to recommend to its Board of Directors a quarterly dividend on the SunCoke Common Stock of approximately $0.06 per share (an annualized dividend of $0.24 per share) beginning in the first full quarter immediately following the completion of the Merger. As such, the pro forma adjustment to dividends declared per share for the year ended December 31, 2018 would have been $0.24 per share rather than the $0.3170 per share shown above.

 

(e)

Pro forma book value per share calculated as follows (in millions, except per share amounts):

 

     December 31, 2018  

Equity before noncontrolling interest

   $ 705.6  

Divided by: Number of shares outstanding as of period end

     89.6  
  

 

 

 

Book value per share

   $ 7.88  
  

 

 

 

 

(f)

SXCP equivalent pro forma amounts are calculated by multiplying the SunCoke pro forma amounts by the Exchange Ratio.

 

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MARKET PRICE AND CASH DISTRIBUTION INFORMATION

SunCoke Common Stock and SXCP Common Units are each listed on the New York Stock Exchange (the “NYSE”) under the symbols “SXC” and “SXCP,” respectively. The following table sets forth for the periods indicated the high and low per-share and per-unit sales price of SunCoke Common Stock and SXCP Common Units, respectively, and the cash dividends per share and cash distributions per unit of SunCoke Common Stock and SXCP Common Units, respectively, for each of the last two fiscal years and the current fiscal year.

 

     SunCoke      SXCP  
     High      Low      Cash
Dividends
per Share
     High      Low      Cash
Distributions
per Unit (1)
 

2017

                 

First Quarter

   $  11.88      $ 8.04      $  —        $  20.70      $  13.50      $  0.594  

Second Quarter

   $ 11.47      $ 7.66      $ —        $ 18.00      $ 14.60      $ 0.594  

Third Quarter

   $ 11.25      $ 8.20      $ —        $ 19.00      $ 15.90      $ 0.594  

Fourth Quarter

   $ 12.57      $ 9.01      $ —        $ 18.32      $ 16.30      $ 0.594  

2018

                 

First Quarter

   $ 13.43      $ 9.38      $ —        $ 21.95      $ 17.45      $ 0.400  

Second Quarter

   $ 14.32      $ 10.45      $ —        $ 18.60      $ 14.70      $ 0.400  

Third Quarter

   $ 13.96      $ 10.37      $ —        $ 17.80      $ 14.90      $ 0.400  

Fourth Quarter

   $ 12.04      $ 7.63      $ —        $ 15.54      $ 9.61      $ 0.400  

2019

                 

First Quarter (through March 7, 2019)

   $ 11.36      $ 8.26      $ —        $ 15.20      $ 10.50      $ [N/A ](2) 

 

(1)

Represents cash distributions per SXCP Common Unit declared with respect to the quarter presented and paid in the following quarter.

(2)

Cash distributions with respect to the first quarter of 2019 have not yet been declared or paid.

On February 4, 2019, the last full trading day prior to the public announcement of the proposed Merger, the closing price for each share of SunCoke Common Stock as reported on the NYSE was $10.93 and the closing price for each SXCP Common Unit as reported on the NYSE was $14.00. On March 7, 2019, the last practicable trading day prior to the filing date of this joint prospectus/consent statement/proxy statement, the closing price for each share of SunCoke Common Stock as reported on the NYSE was $9.00 and the closing price for each SXCP Common Unit as reported on the NYSE was $13.16.

As of March 7, 2019, there were approximately 10,549 record holders of SunCoke Common Stock and three record holders of SXCP Common Units.

No assurance can be given concerning the market price for SunCoke Common Stock before or after the Merger. The market price for SunCoke Common Stock will fluctuate between the date of this joint prospectus/consent statement/proxy statement and the date on which the Merger is consummated and thereafter.

The SXCP Partnership Agreement provides that SXCP will distribute its cash available for distributions, if any, to SXCP Common Unitholders of record on the applicable record date (such distributions are more fully described in the section titled “Comparison of the Rights of SunCoke Stockholders and SXCP Common Unitholders”). As a result of the conversion and cancellation of SXCP Common Units in connection with the Merger, SXCP will no longer make quarterly distributions following the consummation of the Merger.

The Merger Agreement restricts the ability of SunCoke to, prior to the consummation of the Merger, declare, set aside or pay any dividend or distribution payable in cash, stock, or property in respect of any capital stock, other than regular quarterly cash dividends or distributions that have a record date after the effective time of the Merger. See the section titled “The Merger Agreement—Covenants and Other Agreements.”

 

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RISK FACTORS

You should carefully consider the following risk factors, together with all of the other information in this joint prospectus/consent statement/proxy statement, the documents incorporated herein by reference and the documents to which you are referred herein. In particular, please read Part I, Item 1A, “Risk Factors,” in SunCoke’s Annual Report on Form 10-K for the year ended December 31, 2018 and SXCP’s Annual Report on Form 10-K for the year ended December 31, 2018, each of which is incorporated by reference herein. Each of these factors could adversely affect the consummation of the Merger, SunCoke’s and SXCP’s respective businesses, operating results and financial conditions, and the value of an investment in SunCoke Common Stock. This joint prospectus/consent statement/proxy statement also contains forward-looking statements that involve risks and uncertainties. Please read “Information Regarding Forward-Looking Statements.”

Risks Related to the Merger

The Merger is subject to closing conditions that, if not satisfied or waived, will result in the Merger not being consummated, which may cause the market price of SXCP Common Units and/or SunCoke Common Stock to decline.

The obligation of the parties to the Merger Agreement to complete the Merger is subject to the satisfaction or waiver of certain conditions, including:

 

   

the approval and adoption of the Merger Agreement and the transactions contemplated thereby, including the Merger, by holders of at least a majority of the outstanding SXCP Common Units;

 

   

the absence of legal injunctions prohibiting the transactions contemplated by the Merger Agreement;

 

   

the effectiveness of the registration statement of which this joint prospectus/consent statement/proxy statement forms a part, with respect to the Parent Stock Issuance;

 

   

approval of the listing on the NYSE, subject to official notice of issuance, of the SunCoke Common Stock to be issued in the Merger;

 

   

the affirmative vote of the holders of a majority of the votes cast at the special meeting of SunCoke’s Stockholders (the “SunCoke Special Meeting”) or any adjournment or postponement thereof to approve the Parent Stock Issuance;

 

   

the receipt of all governmental consents and approvals, the absence of which would, individually or in the aggregate, have a material adverse effect on either SunCoke or SXCP; and

 

   

the clearing of this joint prospectus/consent statement/proxy statement by the SEC and the mailing of such to holders of SunCoke Common Stock and SXCP Common Units at least 20 business days prior to the Closing (as defined in the Merger Agreement).

The parties’ obligations are also separately subject to the satisfaction or waiver of the following conditions:

 

   

certain fundamental representations and warranties of the other party relating to organization and existence, authorization to enter into the Merger Agreement and to complete the transactions contemplated thereby and capitalization being true and correct as of the Closing in all material respects;

 

   

the representations and warranties of the other party relating to the absence of changes that would have a material adverse effect on such party and the absence of material damage, destruction, or loss to any material portion of assets of such party or its subsidiaries being true and correct as of the Closing;

 

   

all other representations and warranties of the other party being true and correct as of the Closing (except to the extent such representations and warranties expressly relate to an earlier date, in which case as of such earlier date), other than certain failures to be true and correct that would not in the aggregate result in a material adverse effect on the party making the representation or warranty; and

 

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the other party having performed or complied with all agreements and covenants required to be performed by it under the Merger Agreement in all material respects.

If these conditions are not satisfied or waived, the Merger will not occur, which may cause the market price of SXCP Common Units and/or SunCoke Common Stock to decline.

Financial projections regarding SXCP and SunCoke may not be realized.

Certain internal financial information and forecasts for SXCP and SunCoke were prepared by employees of SunCoke, including those who normally render services to SXCP. These financial projections include assumptions regarding future operating cash flows, expenditures and income of SXCP and SunCoke. These financial projections were not prepared with a view to public disclosure, are subject to significant economic, competitive, industry and other uncertainties, and may not be achieved in full, at all, or within projected timeframes. The failure of SXCP’s or SunCoke’s businesses to achieve projected results, including projected cash flows, could have a material adverse effect on the price of SunCoke Common Stock, SunCoke’s financial position and SunCoke’s ability to reinstate, maintain or increase its dividends following the Merger.

The unaudited pro forma financial statements included in this joint prospectus/consent statement/proxy statement are presented for illustrative purposes only and may not be an indication of the combined entity’s financial condition or results of operations following the Merger.

The unaudited pro forma financial statements contained in this joint prospectus/consent statement/proxy statement are presented for illustrative purposes only, are based on various adjustments, assumptions and preliminary estimates and may not be an indication of the financial condition or results of operations of the combined entity following the Merger for several reasons. The actual financial condition and results of operations of the combined entity following the Merger may not be consistent with, or evident from, these pro forma financial statements. In addition, the assumptions used in preparing the pro forma financial information may not prove to be accurate, and other factors may affect the financial condition or results of operations of the combined entity following the Merger. Any potential decline in the financial condition or results of operations of the combined entity may cause significant variations in the price of SunCoke Common Stock after completion of the Merger. See the section titled “The Merger – Unaudited Financial Projections of SunCoke and SXCP.”

The number of shares of SunCoke Common Stock that SXCP Public Unitholders will be entitled to receive in the Merger is based upon the Exchange Ratio, which is a fixed exchange ratio. As a result, the market value of the shares of SunCoke Common Stock that SXCP Public Unitholders receive for their SXCP Public Units in the Merger could decrease prior to the consummation of the Merger.

The Exchange Ratio is fixed, meaning that it does not change and is not dependent upon the relative values of SXCP Public Units and SunCoke Common Stock. Therefore, there is no “price protection” mechanism contained in the Merger Agreement that would adjust the number of shares of SunCoke Common Stock that SXCP Public Unitholders will receive based on any decreases in the trading price of SunCoke Common Stock or increases in the trading price of SXCP Common Units. If the price of SunCoke Common Stock decreases because of changes in SunCoke’s business, operations, or prospects, market reactions to the Merger, general market and economic conditions, or any other factors, such as an announcement by SunCoke that it will pursue another merger or acquisition or an equity or debt offering, the market value of the shares of SunCoke Common Stock received by SXCP Public Unitholders will also decrease. Consistent with the Merger Agreement, if SunCoke engages in any such transactions and the market price of SunCoke Common Stock declines in value as a result, SXCP Public Unitholders will receive less value for their SXCP Public Units than the value calculated pursuant to the Exchange Ratio on the date the Merger was announced. For historical and current market prices of SXCP Common Units and SunCoke Common Stock, please read the “Market Price and Cash Distribution Information” section of this joint prospectus/consent statement/proxy statement.

 

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The SXCP Partnership Agreement limits the duties of the SXCP General Partner to SXCP Common Unitholders and restricts the remedies available to SXCP Common Unitholders for actions taken by the SXCP General Partner that might otherwise constitute breaches of its duties.

Under the SXCP Partnership Agreement, whenever a potential conflict of interest exists or arises between the SXCP General Partner or any of its affiliates, on the one hand, and SXCP, its subsidiaries, any partner of SXCP or any other person who acquires an interest in SXCP or any other person who is bound by the SXCP Partnership Agreement, on the other hand, the SXCP General Partner may in its discretion submit any resolution or course of action with respect to such conflict of interest for “Special Approval” or approval by the vote of a majority of the SXCP Common Units (excluding SXCP Common Units owned by SXCP General Partner and its affiliates). If such course of action or resolution receives Special Approval or approval of a majority of the SXCP Common Units (excluding SXCP Common Units owned by SXCP General Partner and its affiliates), then such course of action or resolution will be conclusively deemed approved by SXCP, all of its partners, each person who acquires an interest in SXCP and each other person who is bound by the SXCP Partnership Agreement, and will not constitute a breach of the SXCP Partnership Agreement or any governing agreement of any of SXCP’s subsidiaries or any fiduciary or other duty existing at law, in equity or otherwise.

For more information concerning the differing applications of duties to corporations and limited partnerships, please read “Comparison of the Rights of SunCoke Stockholders and SXCP Common Unitholders—Fiduciary Duties; Conflicts of Interest” beginning at page 96.

In light of potential conflicts of interest between SunCoke and the SXCP General Partner, on the one hand, and SXCP and the SXCP Public Unitholders, on the other hand, the SXCP Board submitted the Merger and related matters to the SXCP Conflicts Committee for Special Approval.

The SXCP Conflicts Committee reviewed, negotiated and evaluated the Merger Agreement, the Support Agreement, the Merger and related matters on behalf of SXCP and the SXCP Public Unitholders. The SXCP Conflicts Committee, by a unanimous vote held on February 4, 2019, (i) determined that the Merger Agreement and the transactions contemplated thereby are in the best interest of SXCP, including the holders of SXCP Public Units, (ii) approved the Merger Agreement and the transactions contemplated thereby, including the Merger (the foregoing constituting SXCP Special Approval under the SXCP Partnership Agreement), and (iii) recommended that the SXCP Board approve the Merger Agreement and the consummation of the transactions contemplated thereby, including the Merger. As described above, the duties of the SXCP General Partner, the SXCP Board and the SXCP Conflicts Committee to SXCP Common Unitholders in connection with the Merger are substantially limited by the SXCP Partnership Agreement.

The executive officers and directors of SunCoke may have interests that differ in certain respects from those of the SunCoke Stockholders.

In considering the SunCoke Board’s recommendation to approve the Parent Stock Issuance at the SunCoke Special Meeting (such recommendation, the “SunCoke Board Recommendation”), the SunCoke Stockholders should consider that the executive officers and directors of SunCoke may have interests that differ from, or are in addition to, their interests as SunCoke Stockholders. See the section titled “The Merger—Interests of Certain Persons in the Merger Transactions.”

SunCoke and SXCP will incur transaction-related costs in connection with the Merger.

SunCoke and SXCP expect to incur a number of non-recurring transaction-related costs associated with completing the Merger, which are currently estimated to total approximately $[    ] million. Non-recurring transaction costs include, but are not limited to, fees paid to legal, financial, and accounting advisors, filing fees, and printing costs. There can be no assurance that the elimination of certain costs as a result of the Merger will offset the incremental transaction-related costs over time. Thus, any net cost savings may not be achieved in the near term, the long term or at all.

 

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Under the Merger Agreement, if the Merger Agreement is terminated under certain specified circumstances, SunCoke would be required to pay SXCP’s expenses and, under certain circumstances, a termination fee.

The Merger Agreement contains provisions granting both SunCoke and SXCP the right to terminate the Merger Agreement for certain reasons, including, among others, if: (i) the Merger is not completed on or before September 30, 2019 (the “Termination Date”); (ii) any governmental authority has issued an order, decree or ruling or taken any other action (including the enactment of any statute, rule, regulation, decree or executive order) permanently restraining, enjoining or otherwise prohibiting the Merger; (iii) the SunCoke Special Meeting shall have concluded and the Parent Stock Issuance shall not have been approved; or (iv) under certain conditions, there has been a material breach of any of the representations, warranties, covenants or agreements set forth in the Merger Agreement by a party to the Merger Agreement that is not cured prior to the Termination Date. The Merger Agreement further provides that upon termination of the Merger Agreement under certain circumstances, SunCoke may be required to either (1) pay SXCP a termination fee of $6 million and/or (2) reimburse SXCP for its transaction expenses.

These provisions could discourage third parties that may have interest in acquiring all or a significant part of SunCoke from considering or proposing such an acquisition, or could result in a potential acquirer of SunCoke proposing to pay a lower price than it would otherwise have proposed to pay. See the sections titled “The Merger Agreement—SunCoke Board Recommendation and SunCoke Adverse Recommendation Change,” “The Merger Agreement—Termination,” and “The Merger Agreement—Expense Reimbursement and Termination Fee.”

SXCP has no ability to enter into a transaction that is not approved by the SXCP General Partner, which is controlled by SunCoke.

SunCoke controls the SXCP General Partner, which in turn controls SXCP. Accordingly, any transaction entered into by SXCP would need to be approved by the SXCP General Partner. Because SunCoke controls the SXCP General Partner, SunCoke could effectively block SXCP from entering into any transaction that SunCoke does not support.

Tax Risks Related to the Merger and the Ownership of SunCoke Common Stock Received in the Merger

In addition to reading the following risk factors, you are urged to read “Material U.S. Federal Income Tax Consequences” for a more complete discussion of the expected U.S. federal income tax consequences of the Merger and owning and disposing of SunCoke Common Stock received in the Merger.

The Merger should be a taxable transaction and, in such case, the resulting tax liability of an SXCP Public Unitholder, if any, will depend on such unitholder’s particular situation.

SXCP Public Unitholders will receive SunCoke Common Stock and cash in lieu of fractional shares, if any, in exchange for their SXCP Public Units. Although SXCP Public Unitholders will receive no cash consideration other than any cash received in lieu of fractional shares, if any, the Merger should be treated as a taxable sale by SXCP Public Unitholders for U.S. federal income tax purposes. In such case, as a result of the Merger, an SXCP Public Unitholder will recognize gain or loss for U.S. federal income tax purposes equal to the difference between such unitholder’s amount realized and the unitholder’s adjusted tax basis in the SXCP Public Units. The amount of gain or loss recognized by each SXCP Public Unitholder in the Merger will vary depending on each unitholder’s particular situation, including the value of the shares of SunCoke Common Stock and the amount of cash in lieu of fractional shares, if any, received by each unitholder in the Merger, the adjusted tax basis of the SXCP Public Units exchanged by each unitholder in the Merger, and the amount of any suspended passive losses that may be available to a particular unitholder to offset a portion of the gain recognized by the unitholder. You are strongly urged to consult your tax advisor for a full understanding of the particular tax consequences of the Merger to you.

 

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The tax liability of an SXCP Public Unitholder as a result of the Merger could be more than expected.

Because the value of any SunCoke Common Stock received in the Merger will not be known until the effective time of the Merger, an SXCP Public Unitholder will not be able to determine its amount realized, and therefore its taxable gain or loss, until such time. In addition, because prior distributions in excess of an SXCP Public Unitholder’s allocable share of SXCP’s net taxable income decrease such SXCP Public Unitholder’s tax basis in its SXCP Public Units, the amount, if any, of such prior excess distributions with respect to such SXCP Public Units will, in effect, become taxable income to an SXCP Public Unitholder if the aggregate value of the consideration received in the Merger is greater than such SXCP Public Unitholder’s adjusted tax basis in its SXCP Public Units, even if the aggregate value of the consideration received in the Merger is less than such SXCP Public Unitholder’s original cost basis in its SXCP Public Units. Furthermore, a portion of this gain or loss, which portion could be substantial, will be separately computed and taxed as ordinary income or loss to the extent attributable to assets giving rise to depreciation recapture or other “unrealized receivables” or to “inventory items” owned by SXCP and its subsidiaries.

For a more complete discussion of certain U.S. federal income tax consequences of the Merger, please read “Material U.S. Federal Income Tax Consequences.”

The U.S. federal income tax treatment to SXCP Public Unitholders with respect to owning and disposing of any shares of SunCoke Common Stock received in the Merger will be different than their U.S. federal income tax treatment with respect to owning and disposing of their SXCP Public Units.

SXCP is classified as a partnership for U.S. federal income tax purposes and, generally, is not subject to entity-level U.S. federal income taxes. Instead, each SXCP Public Unitholder is required to take into account such unitholder’s share of items of income, gain, loss, and deduction of SXCP in computing its U.S. federal income tax liability, regardless of whether cash distributions are made to such SXCP Public Unitholder by SXCP. A distribution of cash by SXCP to an SXCP Public Unitholder who is a U.S. holder (as defined in the section titled “Material U.S. Federal Income Tax Consequences”) is generally not taxable for U.S. federal income tax purposes unless the amount of cash distributed is in excess of the SXCP Public Unitholder’s adjusted tax basis in its SXCP Public Units. In contrast, SunCoke is classified as a corporation for U.S. federal income tax purposes, and thus, SunCoke (and not its stockholders) is subject to U.S. federal income tax on its taxable income. A distribution of cash by SunCoke to a stockholder who is a U.S. holder will generally be included in such U.S. holder’s income as ordinary dividend income to the extent of SunCoke’s current or accumulated “earnings and profits,” as determined under U.S. federal income tax principles. A portion of the cash distributed to SunCoke Stockholders by SunCoke after the Merger may exceed SunCoke’s current and accumulated earnings and profits. Cash distributions in excess of SunCoke’s current and accumulated earnings and profits will be treated as a non-taxable return of capital, reducing a U.S. holder’s adjusted tax basis in such stockholder’s SunCoke Common Stock and, to the extent the cash distribution exceeds such stockholder’s adjusted tax basis, as gain from the sale or exchange of such shares of SunCoke Common Stock.

Please read “Material U.S. Federal Income Tax Consequences” for a more complete discussion of certain U.S. federal income tax consequences of owning and disposing of SunCoke Common Stock.

Risks Inherent in an Investment in SunCoke

The SunCoke Common Stock to be received by SXCP Public Unitholders as a result of the Merger has different rights from SXCP Common Units.

Following completion of the merger, SXCP Public Unitholders will no longer hold SXCP Common Units, but will instead hold shares of SunCoke Common Stock. SunCoke is a corporation and SXCP is a limited partnership. There are important differences between the rights of SXCP Common Unitholders and the rights of SunCoke Stockholders. See the section titled “Comparison of the Rights of SunCoke Stockholders and SXCP Common Unitholders” for a discussion of the different rights associated with SXCP Common Units and SunCoke Common Stock.

 

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SunCoke may only declare and pay dividends in accordance with the DGCL.

Under the General Corporation Law of the State of Delaware (the “DGCL”), the SunCoke Board may not authorize payment of a dividend unless it is either (i) paid out of surplus, as calculated in accordance with the DGCL, or (ii) if SunCoke does not have a surplus, paid out of net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. If SunCoke is unable to authorize payment of dividends in accordance with the DGCL, a decline in the market price or liquidity, or both, of the SunCoke Common Stock could result. This may in turn result in losses by SunCoke Stockholders.

The price of SunCoke Common Stock may be volatile, and holders of SunCoke Common Stock could lose a significant portion of their assets.

The market price of SunCoke Common Stock could be volatile, and SunCoke Stockholders may not be able to resell their shares of SunCoke Common Stock at or above the price at which they acquired such shares of SunCoke Common Stock due to fluctuations in the market price of SunCoke Common Stock, including changes in price caused by factors unrelated to SunCoke’s operating performance or prospects.

Specific factors that may have a significant effect on the market price for SunCoke Common Stock include:

 

   

failure to complete, or significant delays in completing, the Merger;

 

   

changes in stock market analyst recommendations or earnings estimates regarding SunCoke Common Stock, other companies comparable to SunCoke or companies in the industries SunCoke serves;

 

   

actual or anticipated fluctuations in SunCoke’s operating results or future prospects;

 

   

reaction to SunCoke’s public announcements;

 

   

strategic actions taken by SunCoke or its competitors, such as acquisitions or restructurings;

 

   

the recruitment or departure of key personnel;

 

   

new laws or regulations or new interpretations of existing laws or regulations applicable to SunCoke’s business and operations;

 

   

changes in tax or accounting standards, policies, guidance, interpretations or principles;

 

   

adverse conditions in the financial markets or general U.S. or international economic conditions, including those resulting from war, incidents of terrorism and responses to such events; and

 

   

sales of SunCoke Common Stock by SunCoke, members of its management team or significant stockholders.

 

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THE SUNCOKE SPECIAL MEETING OF STOCKHOLDERS

SunCoke is providing this joint prospectus/consent statement/proxy statement to the SunCoke Stockholders in connection with the solicitation of proxies to be voted at the SunCoke Special Meeting that SunCoke has called for the purposes described below. This joint prospectus/consent statement/proxy statement is first being mailed to SunCoke Stockholders on or about             , 2019 and provides SunCoke Stockholders with the information they need to know about the Merger and the Parent Stock Issuance Proposal to be able to vote or instruct their vote to be cast at the SunCoke Special Meeting.

Date, Time and Place

The SunCoke Special Meeting will be held on             , 2019 at                     , local time, at [the Hotel Arista, 2139 CityGate Lane, Naperville, Illinois 60563]. At the SunCoke Special Meeting, SunCoke Stockholders will be asked to consider and vote on the proposal described immediately below.

The Parent Stock Issuance Proposal

The Parent Stock Issuance Proposal is a proposal to approve the issuance of SunCoke Common Stock pursuant to the terms of the Merger Agreement in connection with the Merger.

If the Merger is completed, each SXCP Public Unit outstanding immediately prior to the effective time of the Merger will be converted into the right to receive (x) 1.40 shares of validly issued, fully paid and nonassessable SunCoke Common Stock and (y) a fraction of a share of SunCoke Common Stock equal to the product of (aa) the number of days beginning with the first day of the most recent full calendar quarter with respect to which an SXCP unitholder distribution record date has not occurred (or, if there is no such full calendar quarter, then beginning with the first day of the partial calendar quarter in which the Closing occurs), and ending on the day immediately prior to the Closing, multiplied by (bb) a daily distribution rate that is equal to the quotient of the most recent regular quarterly cash distribution paid by SXCP divided by 90, such product divided by $10.91, which was the closing price of the SunCoke Common Stock as of February 1, 2019, the last full trading day prior to the date of the execution of the Merger Agreement. Upon such conversion, each SXCP Public Unit will be canceled and will cease to exist.

Under NYSE rules, stockholder approval is required prior to the issuance of SunCoke Common Stock if the number of shares of common stock to be issued equals 20% or more of the number of shares of common stock outstanding prior to the issuance. The Parent Stock Issuance is expected to result in the issuance of a number of shares of SunCoke Common Stock equal to approximately [    ]% of the shares of SunCoke Common Stock outstanding immediately prior to the effective time of the Merger. Accordingly, SunCoke Stockholders are being asked to consider and vote upon the Parent Stock Issuance. The approval of the Parent Stock Issuance requires the affirmative vote (in person or by proxy) of the holders of a majority of the aggregate voting power present at the SunCoke Special Meeting or any adjournment or postponement thereof, provided a quorum is present.

Board Recommendation

The SunCoke Board recommends that SunCoke Stockholders vote “FOR” the Parent Stock Issuance Proposal. See the section titled “The Merger—Recommendation of the SunCoke Board and Its Reasons for the Merger.”

In considering the recommendation of the SunCoke Board with respect to the Parent Stock Issuance Proposal, you should be aware that SunCoke’s executive officers and directors may have interests that are different from, or in addition to, the interests of SunCoke Stockholders more generally. See the section titled “The Merger—Interests of Certain Persons in the Merger Transactions.”

 

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Record Date; Outstanding Shares; Shares Entitled to Vote

Only SunCoke Stockholders of record as of the close of business on the SunCoke Vote Record Date of             , 2019, will be entitled to receive notice of and to vote at the SunCoke Special Meeting or at any adjournment or postponement thereof. SunCoke Common Stock held by SunCoke as treasury shares will not be entitled to vote.

As of the close of business on the SunCoke Vote Record Date, there were                    shares of SunCoke Common Stock and no other shares of capital stock outstanding and entitled to vote at the SunCoke Special Meeting. Each SunCoke Stockholder is entitled to one vote for each share of SunCoke Common Stock owned as of the SunCoke Vote Record Date.

A complete list of SunCoke Stockholders entitled to vote at the SunCoke Special Meeting will be available for inspection at SunCoke’s principal place of business during regular business hours for a period of no fewer than ten days before the SunCoke Special Meeting and, during the SunCoke Special Meeting, at [the Hotel Arista, 2139 CityGate Lane, Naperville, Illinois 60563].

Quorum

A majority of the outstanding shares of SunCoke Common Stock as of the SunCoke Vote Record Date must be represented in person or by proxy at the SunCoke Special Meeting in order to constitute a quorum.

Required Vote

The approval of the Parent Stock Issuance Proposal requires the affirmative vote (in person or by proxy) of the holders of a majority of the aggregate voting power present at the SunCoke Special Meeting or any adjournment or postponement thereof, provided a quorum is present. If you abstain from voting on the Parent Stock Issuance Proposal, your shares of SunCoke Common Stock will be counted as present for purposes of establishing a quorum, but the abstention will not be counted as a vote cast either “FOR” or “AGAINST” the Parent Stock Issuance Proposal.

The obligations of the parties to complete the Merger are conditioned upon the Parent Stock Issuance Approval. Accordingly, a vote against or an abstention with respect to the Parent Stock Issuance Proposal, or a failure to vote on the Parent Stock Issuance Proposal, to the extent such failure prevents the establishment of a quorum, will have the same effect as a vote against the Parent Stock Issuance Proposal and the Merger (although no vote for or against the Merger is taking place).

Stock Ownership of and Voting of SunCoke’s Directors and Executive Officers

As of the SunCoke Vote Record Date, SunCoke’s directors and executive officers beneficially owned and were entitled to vote, in the aggregate, approximately     % of the outstanding SunCoke Common Stock.

Voting and Submitting a Proxy for SunCoke Common Stock Held by Holders of Record

If you were a holder of record of SunCoke Common Stock at the close of business on the SunCoke Vote Record Date, you may vote in person by attending the SunCoke Special Meeting or, to ensure that your shares are represented at the SunCoke Special Meeting, you may authorize a proxy to vote:

 

   

via telephone, using the toll-free number listed on your proxy card;

 

   

over the Internet, at the address provided on the Notice of Internet Availability or on your proxy card; or

 

   

by marking, signing, dating and mailing your proxy card or voting instruction form and returning it in the envelope provided.

 

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When you submit a proxy by telephone or via the Internet, your proxy is recorded immediately. We encourage you to submit your proxy using these methods whenever possible. If you submit a proxy by telephone or via the Internet, please do not return your proxy card by mail.

All shares of SunCoke Common Stock represented by each properly executed and valid proxy received before the SunCoke Special Meeting will be voted in accordance with the instructions given on the proxy. If a SunCoke Stockholder executes a proxy card without giving instructions, the SunCoke Common Stock represented by that proxy card will be voted “FOR” the Parent Stock Issuance Proposal.

Your vote is important. Accordingly, please submit your proxy by telephone, via the Internet, or by mail whether or not you plan to attend the meeting in person. Proxies must be received by                    , Central Time, on            , 2019.

Voting and Submitting a Proxy for SunCoke Common Stock Held in Street Name

If your SunCoke Common Stock is held in an account at a bank, broker or other nominee, you must instruct the bank, broker or other nominee on how to vote them by following the instructions that the bank, broker or other nominee provides to you with these proxy materials. Most banks, brokers and other nominees offer the ability for stockholders to submit voting instructions by mail by completing a voting instruction card, by telephone and via the Internet.

If you hold your SunCoke Common Stock in a brokerage account and you do not provide voting instructions to your broker, your shares will not be voted on any proposal because under the current rules of the NYSE, brokers do not have discretionary authority to vote on the Parent Stock Issuance Proposal. Since there are no items on the agenda that your broker has discretionary authority to vote upon, broker non-votes will not be counted as present at the meeting if you fail to instruct your brokerage firm on how to vote on the Parent Stock Issuance Proposal. Therefore, a broker non-vote will have no effect on the Parent Stock Issuance Proposal, except to the extent such broker non-vote prevents the establishment of a quorum at the SunCoke Special Meeting.

If you hold shares through a bank, broker or other nominee and wish to vote your shares in person at the SunCoke Special Meeting, you must obtain a legal proxy from your bank, broker or other nominee and present it to the inspector of election with your ballot when you vote at the SunCoke Special Meeting.

Revocability of Proxies; Changing Your Vote

If you are a stockholder of record, you may revoke your proxy and/or change your vote by:

 

   

re-voting via telephone or over the internet (only your latest telephone or internet vote will be counted),

 

   

signing and dating a new proxy card and submitting it (only your latest proxy card will be counted),

 

   

if you are a registered SunCoke Stockholder, delivering timely notice of revocation to the Corporate Secretary, SunCoke Energy, Inc., 1011 Warrenville Road, Suite 600, Lisle, Illinois 60532, or

 

   

attending the SunCoke Special Meeting and voting in person.

If you choose to revoke your proxy by written notice or submit a later-dated proxy, you must do so by                     , Central Time, on            , 2019.

If your shares are held in “street name,” please contact your broker, financial institution or other nominee and comply with the broker’s, financial institution’s or other nominee’s procedures if you want to change or revoke your previous voting instructions. Attending the SunCoke Special Meeting in person will not in and of itself revoke a previously submitted proxy unless you specifically request it.

 

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Solicitation of Proxies

The cost of soliciting proxies will be borne by SunCoke. In addition to solicitation by mail, SunCoke’s officers and other employees may solicit proxies personally, by telephone, by e-mail and by facsimile. SunCoke may request banks and brokers or other similar agents or fiduciaries to transmit the proxy materials to the beneficial owners for their voting instructions and will reimburse them for their expenses in so doing. SunCoke has retained Morrow Sodali LLC (“Morrow Sodali”), 470 West Ave, Stamford, Connecticut 06902, to assist in the solicitation of proxies for an estimated fee of $18,500, plus reimbursement of certain out-of-pocket expenses.

No Other Business

No business shall be conducted at the SunCoke Special Meeting other than the matters described herein.

Adjournments

Adjournments may be made for the purpose of, among other things, soliciting additional proxies. If there are insufficient votes at the SunCoke Special Meeting to approve the Parent Stock Issuance Proposal and it is necessary or appropriate to solicit additional proxies, the SunCoke Special Meeting may be adjourned. The Chairman of the SunCoke Board or the President of SunCoke may adjourn the meeting whether or not a quorum is not present. SunCoke is not required to notify the SunCoke Stockholders of any adjournment of 30 days or less if the time and place of the adjourned meeting are announced at the SunCoke Special Meeting. At any adjourned meeting, SunCoke may transact any business that it might have transacted at the original meeting, provided that a quorum is present at such adjourned meeting. Proxies submitted by the SunCoke Stockholders for use at the SunCoke Special Meeting will be used at any adjournment or postponement of the SunCoke Special Meeting. References to the SunCoke Special Meeting in this joint prospectus/consent statement/proxy statement are to such SunCoke Special Meeting as may be adjourned or postponed.

Attending the SunCoke Special Meeting

All SunCoke Stockholders as of the close of business on the SunCoke Vote Record Date, or their duly appointed proxies, may attend the SunCoke Special Meeting. Seating, however, is limited. Admission to the SunCoke Special Meeting will be on a first-come, first-served basis. Registration will begin on the date of the SunCoke Special Meeting at                    local time, and seating will begin at                     local time. Cameras, recording devices and other electronic devices will not be permitted at the SunCoke Special Meeting.

SunCoke Stockholders and proxies will be asked to present valid picture identification, such as a driver’s license or passport. If you hold your shares in street name, you will also need to bring a copy of the voting instruction card you receive from your bank, broker or other nominee in connection with the SunCoke Special Meeting or a brokerage statement reflecting your SunCoke Common Stock ownership as of the close of business on the SunCoke Vote Record Date and check-in at the registration desk at the SunCoke Special Meeting.

Assistance

If you need assistance in completing your proxy card, have questions regarding the SunCoke Special Meeting, or would like additional copies, without charge, of this document, please contact SunCoke’s or SXCP’s Investor Relations Departments at (630) 824-1907 or (630) 824-1987, respectively or Morrow Sodali at (203) 658-9400 (for banks and brokers) or (toll-free) at (800) 662-5200 (for all others).

 

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THE MERGER

General

On February 4, 2019, SunCoke, Merger Sub, SXCP and SXCP General Partner entered into the Merger Agreement pursuant to which Merger Sub will be merged with and into SXCP, with SXCP being the surviving entity. In addition, if the Merger is successfully completed, SXCP Common Units will no longer be listed and traded on the NYSE.    

Pursuant to the Merger Agreement, all SXCP Public Units outstanding immediately prior to the effective time of the Merger will be converted into the right to receive the Merger Consideration and, upon such conversion, will be canceled and will cease to exist.    

The approval and adoption of the Merger Agreement and the Merger by SXCP requires the affirmative vote or consent of holders of at least a majority of the outstanding SXCP Common Units. Pursuant to the terms of a Support Agreement, dated as of February 4, 2019, by and between Sun Coal & Coke LLC (“SC&C”) and SXCP (such agreement, the “Support Agreement”), SC&C, a wholly owned subsidiary of SunCoke which as of February 4, 2019, beneficially owned 28,499,899 SXCP Common Units representing approximately 61.7% of the outstanding SXCP Common Units, has irrevocably and unconditionally agreed to deliver a written consent approving (in all manners and by each applicable class) the Merger, the Merger Agreement and any other matters necessary for consummation of the Merger and the other transactions contemplated in the Merger Agreement (the “SC&C Written Consent”), within two business days after the effectiveness of the registration statement of which this joint prospectus/consent statement/proxy statement forms a part. The delivery of the SC&C Written Consent by SC&C will be sufficient to approve the Merger Agreement and the transactions contemplated thereby, including the Merger, on behalf of SXCP. As a result, no further action by any unitholder of SXCP is required under applicable law or otherwise to approve the Merger Agreement and the transactions contemplated thereby, including the Merger, and SXCP will not solicit the vote or consent of SXCP Public Unitholders for approval of the Merger Agreement and the transactions contemplated thereby, including the Merger, and will not call a special meeting of the SXCP Common Unitholders for purposes of voting on the approval of the Merger Agreement and the transactions contemplated thereby, including the Merger.

As a condition to the Closing, the SunCoke Stockholders must approve the Parent Stock Issuance at the SunCoke Special Meeting. The approval of the Parent Stock Issuance requires the affirmative vote (in person or by proxy) of the holders of a majority of the aggregate voting power present at the SunCoke Special Meeting or any adjournment or postponement thereof, provided a quorum is present.

SunCoke’s Ownership Interest in and Control of SXCP

SXCP Public Unitholders should be aware that SXCP is controlled by SunCoke through SunCoke’s 100% ownership of the SXCP General Partner. The SXCP General Partner owns all of the outstanding general partner interests in SXCP. As a result, SunCoke appoints the members of the SXCP Board, a majority of whom are affiliated with SunCoke and its affiliates, and thereby could be seen as controlling all of SXCP’s decisions, other than those involving certain conflicts of interest with SunCoke or that require an affirmative vote of holders of the limited partner interests in SXCP pursuant to and in the percentages specified by the SXCP Partnership Agreement. Additionally, in July 2015, the SXCP Board authorized a program for SXCP to repurchase up to $50 million of the SXCP Common Units from time to time in open market transactions, including block trades, or in privately negotiated transactions. As of February 4, 2019, $12.8 million of SXCP Common Units had been repurchased and canceled under the authorized unit repurchase program. As of February 4, 2019, SunCoke, through its ownership of SC&C, owned approximately 61.7% of the outstanding SXCP Common Units.

Certain persons associated with SXCP General Partner and SXCP have a relationship with SunCoke.

 

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Michael G. Rippey, who serves as Chairman, President and Chief Executive Officer of SXCP General Partner, also serves as a director and executive officer of SunCoke. Fay West, who serves as a director and the Senior Vice President and Chief Financial Officer of SXCP General Partner, also serves as an executive officer of SunCoke. P. Michael Hardesty, who serves as a director and the Senior Vice President, Commercial Operations, Business Development, Terminals and International Coke of SXCP General Partner, also serves as an executive officer of SunCoke. Katherine Gates, who serves as a director and Senior Vice President, General Counsel and Chief Compliance Officer of SXCP General Partner, also serves as an executive officer of SunCoke. Gary Yeaw, who serves as Senior Vice President, Human Resources of SXCP General Partner, also serves as an executive officer at SunCoke.

See the section titled “The Merger—Interests of Certain Persons in the Merger Transactions.”

Background of the Merger

On October 31, 2016, SunCoke announced that it had submitted a proposal to the SXCP Board to acquire all of the SXCP Common Units not already owned by SunCoke and its affiliates. Under the terms of the proposal, SXCP Public Unitholders would receive approximately 1.65 new shares of SunCoke Common Stock for each SXCP Public Unit, representing an implied purchase price of $17.80 per SXCP Common Unit, or approximately a 5% premium, based on the closing price of SXCP Common Units on October 28, 2016, the last trading day prior to announcement of the proposal. At the time of the announcement, SunCoke owned approximately 53.9% of SXCP’s outstanding Common Units, which it stated that it intended to vote in favor of the proposed transaction. SunCoke also stated at the time that it expected that the proposal would be delegated to the SXCP Conflicts Committee for its consideration.

Following its receipt of the proposal, the SXCP Conflicts Committee engaged legal and financial advisors to assist it in considering the proposal.

On April 20, 2017, in connection with the announcement of its first quarter 2017 results, SunCoke announced the termination of discussions with the SXCP Conflicts Committee. SunCoke disclosed that the SXCP Conflicts Committee and its independent advisors reviewed the proposal made by SunCoke and had discussions with SunCoke since receiving the proposal, and that the parties determined that they would not be able to reach an agreement and therefore terminated discussions regarding the proposed transaction. At the time, the then-Chairman, President and Chief Executive Officer of SunCoke stated, “While we continue to believe strongly in the merits of a simplified structure, we were focused on taking a disciplined approach and ultimately it became clear we would not reach an agreement with the [SXCP] Conflicts Committee on a value, through the exchange ratio, for the unaffiliated LP units.”

On February 5, 2018, at a meeting of the SunCoke Board, Michael G. Rippey, who had been elected as SunCoke’s Chief Executive Officer and President effective December 1, 2017, discussed the potential future advisability of SunCoke making a simplification proposal to SXCP. Following this discussion, it was the consensus of the SunCoke Board that the matter should be reviewed in greater depth at a subsequent SunCoke Board meeting.

On July 20, 2018, at a meeting of the SunCoke Board, Mr. Rippey and members of management discussed whether SunCoke should consider making a potential future simplification proposal to SXCP. Following this discussion, it was the consensus of the SunCoke Board that the matter should be reviewed in greater depth at a subsequent SunCoke Board meeting. The SunCoke Board did not specify when the matter should be revisited.

On November 5, 2018, the SunCoke Board held a special telephonic meeting to discuss the potential simplification of SunCoke’s structure by SunCoke’s acquisition of all of the SXCP Common Units not already owned by SunCoke and its affiliates. Prior to the meeting, SunCoke engaged Evercore and lawyers from Baker Botts L.L.P. (“Baker Botts”), as SunCoke’s financial and legal advisors, respectively, each of whom had assisted

 

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SunCoke on the simplification proposal from October 2016 to April 2017. At the meeting, SunCoke management discussed, among other things, the rationale for simplifying SunCoke’s structure, including potential strategic benefits, proposed transaction structure, certain legal and tax considerations, and indicative timing. At the end of the meeting, Mr. Rippey indicated that SunCoke management was prepared, subject to the SunCoke Board’s approval, to provide a merger proposal to SXCP promptly following the upcoming SunCoke Board meeting scheduled for November 27, 2018. Later that day, Mr. Rippey contacted John W. Somerhalder II, chairman of the SXCP Conflicts Committee, to inform him of the potential forthcoming simplification proposal from SunCoke.

On November 26, 2018, Mr. Somerhalder, on behalf of the SXCP Conflicts Committee, contacted representatives of Akin Gump Strauss Hauer & Feld LLP (“Akin Gump”) to engage Akin Gump as independent legal counsel to represent the SXCP Conflicts Committee in connection with the potential transaction. An engagement letter dated November 27, 2018, detailing the terms of Akin Gump’s engagement as independent legal advisor to the SXCP Conflicts Committee, was subsequently executed. Also on November 26, 2018, on the instructions of the SXCP Conflicts Committee, representatives of Akin Gump contacted three financial advisors, including Citigroup Global Markets Inc. (“Citi”), to discuss the SXCP Conflicts Committee’s interest in interviewing them to serve as financial advisor to the SXCP Conflicts Committee in connection with the potential transaction.

On November 27, 2018, the SunCoke Board convened a special telephonic meeting, attended by six of the seven SunCoke directors, as well as members of SunCoke management and representatives of Evercore and Baker Botts. Evercore discussed with the SunCoke Board certain financial and market considerations in the context of the potential simplification transaction. Among other things, the SunCoke Board also discussed with SunCoke management, Evercore and Baker Botts the rationale, potential synergies and other benefits for a simplification transaction in the form of an all-equity stock-for-unit exchange, whereby SunCoke would acquire all outstanding SXCP Common Units not already owned by SunCoke and its affiliates, and the potential implications of attempting and failing to consummate a simplification transaction as was the case two years earlier. After discussion, the SunCoke Board directed SunCoke management to make a proposal to the SXCP Board on the terms approved by the SunCoke Board and further directed SunCoke management to negotiate the terms of such proposal with the SXCP Conflicts Committee and its advisors to determine whether a mutually acceptable agreement could be reached. Later that day, Mr. Rippey notified Mr. Somerhalder that a letter outlining SunCoke’s proposal would be forthcoming.

On November 28, 2018, Mr. Rippey, on behalf of SunCoke, delivered SunCoke’s proposal letter and draft form of merger agreement to the SXCP Board, proposing that SunCoke acquire all outstanding SXCP Common Units not already owned by SunCoke and its affiliates through a merger involving SXCP and a wholly owned subsidiary of SunCoke. The proposal contemplated an all-equity stock-for-unit exchange at an exchange ratio of 1.35 new shares of SunCoke Common Stock for each outstanding publicly held SXCP Common Unit. The draft form of Merger Agreement contemplated, among other things, that the SunCoke Board could withdraw, modify or qualify its recommendation that the SunCoke Stockholders approve the proposed Parent Stock Issuance in connection with the proposed transaction if the SunCoke Board determined in good faith (after consultation with SunCoke’s financial advisors and outside legal counsel) that the failure to take such action would be reasonably likely to be inconsistent with its fiduciary duties to stockholders under applicable law, terminate the Merger Agreement thereafter, and pay the direct and indirect expenses and costs incurred by or on behalf of SXCP, without a termination fee.

On November 29, 2018, the SXCP Conflicts Committee held a meeting, with representatives of Akin Gump in attendance. At that meeting, the SXCP Conflicts Committee interviewed a potential financial advisor to assist the SXCP Conflicts Committee in connection with the proposed Merger.

On December 3, 2018, at a regularly scheduled telephonic meeting, the SXCP Board adopted resolutions formally delegating authority to the SXCP Conflicts Committee, consisting of Mr. Somerhalder and Martha Z. Carnes, independent members of the SXCP Board, to review, evaluate and negotiate the terms of the potential

 

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simplification transaction and related agreements and arrangements with SunCoke, for the purpose of providing, if appropriate, “Special Approval” pursuant to Section 7.9(c) of the SXCP Partnership Agreement and to evaluate the terms and conditions, and determine the advisability, of such a transaction.

Also on December 3, 2018, the SXCP Conflicts Committee met again to interview Citi and one additional potential financial advisor. Representatives of Akin Gump also were present at the meeting. Following the interviews, the SXCP Conflicts Committee resolved to engage Citi as its financial advisor, subject to negotiation of mutually acceptable terms. The SXCP Conflicts Committee selected Citi based on, among other things, Citi’s experience, reputation with similar transactions, and familiarity with SunCoke and SXCP and their industries. The SXCP Conflicts Committee also considered certain information provided by Citi regarding Citi’s material investment banking relationships with SunCoke and SXCP during the prior two-year period.

On December 10, 2018, members of SunCoke management, along with representatives of Evercore and Baker Botts, held a half-day meeting near SunCoke’s headquarters office at which SunCoke management delivered a presentation, with the members of the SXCP Conflicts Committee and representatives of Akin Gump and Citi attending in person and telephonically. The management presentation described SunCoke’s rationale for pursuing the Merger, provided an overview of the proposed transaction, and included certain financial projections prepared by SunCoke management and an overview of the potential pro forma financial impact of the proposed transaction.

On December 11, 2018, SunCoke provided the SXCP Conflicts Committee and its legal and financial advisors with access to a virtual data room containing legal and financial due diligence materials related to SunCoke and SXCP, including financial projections with respect to SunCoke and SXCP.

On December 13, 2018, the SXCP Conflicts Committee held a telephonic meeting attended by representatives of Akin Gump and Citi. At the meeting, Citi provided the SXCP Conflicts Committee with an overview of master limited partnership (“MLP”) market trends, and Akin Gump reviewed with the members of the SXCP Conflicts Committee their duties and obligations under the SXCP Partnership Agreement in connection with their evaluation and consideration of the proposed merger.

On December 20, 2018, the SXCP Conflicts Committee held a telephonic meeting, also attended by representatives of Akin Gump and Citi. At the meeting, Citi provided the SXCP Conflicts Committee with a preliminary overview of the financial terms of the proposed transaction and certain related matters, and the SXCP Conflicts Committee and its advisors further discussed the proposed transaction. The SXCP Conflicts Committee members decided to defer consideration of any potential counterproposal until after receipt of certain additional financial and other information from SunCoke, including as to the assumptions underlying SunCoke’s financial projections.

On December 26, 2018, the SXCP Conflicts Committee held a telephonic meeting, also attended by representatives of Akin Gump and Citi. During the meeting, the SXCP Conflicts Committee and its advisors discussed the supplemental financial information provided on behalf of SunCoke and further discussed preliminary financial aspects of the proposed transaction.

On December 28, 2018, the SXCP Conflicts Committee held a telephonic meeting, also attended by representatives of Akin Gump and Citi, to further discuss certain terms and preliminary financial aspects of the proposed transaction. At the end of the meeting, the SXCP Conflicts Committee instructed its advisors to provide a counterproposal to SunCoke, contemplating: (i) an exchange ratio of 1.45 new shares of SunCoke Common Stock per SXCP Common Unit; and (ii) a one-time, special cash distribution of $1.60 for each outstanding publicly-held SXCP Common Unit at closing. On December 29, 2018, at the direction of the SXCP Conflicts Committee, representatives of Citi delivered to representatives of Evercore the SXCP Conflicts Committee’s response to SunCoke’s proposal of November 28, 2018, reflecting the above terms. The SXCP Conflicts Committee’s counterproposal also noted that the SXCP Conflicts Committee was continuing to evaluate whether to require that the Merger be conditioned upon the approval of a majority of the SXCP Public Unitholders, in addition to the other approvals set forth in the SunCoke proposal.

 

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On January 2, 2019, following discussions with representatives of Evercore and Baker Botts, SunCoke responded to the SXCP Conflicts Committee’s counterproposal of December 29, 2018 by delivering a revised proposal to the SXCP Conflicts Committee contemplating an exchange ratio of 1.39 new shares of SunCoke Common Stock per SXCP Common Unit, without a one-time special cash distribution. In addition, SunCoke noted in its revised proposal that it was not receptive to requiring a vote of the SXCP Public Unitholders.

On January 4, 2019, the SXCP Conflicts Committee held a telephonic meeting to discuss SunCoke’s revised proposal with representatives of Akin Gump and Citi. After considering and discussing SunCoke’s revised proposal, the SXCP Conflicts Committee decided to respond to SunCoke’s January 2, 2019 letter by proposing (i) an exchange ratio of 1.42 new shares of SunCoke Common Stock per SXCP Common Unit; and (ii) a one-time, special cash distribution of $1.20 for each outstanding publicly-held SXCP Common Unit at closing. During the meeting, the SXCP Conflicts Committee and Akin Gump also discussed the initial draft of the Merger Agreement that SunCoke had provided and proposed revisions to such draft.

Later on January 4, 2019, at the direction of the SXCP Conflicts Committee, representatives of Citi delivered to representatives of Evercore the SXCP Conflicts Committee’s response, reflecting the terms discussed at the SXCP Conflicts Committee’s January 4, 2019 meeting, to SunCoke’s January 2, 2019 proposal. In addition, as it had indicated in its December 29, 2018 response, the SXCP Conflicts Committee noted that it was continuing to evaluate whether to require that the Merger be conditioned upon the approval of a majority of the SXCP Public Unitholders, in addition to the other approvals set forth in SunCoke’s November 28, 2018 proposal.

On January 8, 2019, representatives of Akin Gump, on behalf of the SXCP Conflicts Committee, sent to Baker Botts comments to the draft form of Merger Agreement that had been delivered with SunCoke’s proposal of November 28, 2018. Among the comments proposed by Akin Gump were (i) revisions meant to enhance the likelihood of consummation of the Merger, including the payment of a $6 million termination fee from SunCoke to SXCP if the Merger Agreement was terminated under certain circumstances, and (ii) covenants restricting SunCoke’s ability to undertake certain equity issuances and third-party agreements in the period between signing and closing. The proposed revisions to the draft Merger Agreement did not include a vote of a majority of the SXCP Public Unitholders.

On January 11, 2019, SunCoke responded to the SXCP Conflicts Committee’s January 6, 2019 counterproposal by delivering a further revised proposal contemplating an exchange ratio of 1.39 new shares of SunCoke Common Stock per SXCP Common Unit. In its revised proposal, SunCoke expressed its view that paying a one-time, special cash distribution would be contrary to a critical objective of the proposed merger, which was to strengthen the balance sheet of the resultant combined entity. However, SunCoke proposed implementing, subject to approval of the SunCoke Board, a quarterly dividend of $0.05 per share of SunCoke Common Stock, or $0.20 per share of SunCoke Common Stock on an annualized basis, beginning with the first full quarterly period after the closing of the Merger, which represented an increase from the proposed quarterly dividend of $0.01 per share of SunCoke Common Stock, or $0.04 per share of SunCoke Common Stock on an annualized basis, included in the financial projections that had been provided by SunCoke to the SXCP Conflicts Committee.

On January 12, 2019, the SXCP Conflicts Committee held a telephonic meeting with representatives of Akin Gump and Citi. After considering and discussing SunCoke’s January 11, 2019 proposal, the SXCP Conflicts Committee decided to respond to SunCoke’s January 11, 2019 letter by proposing: (i) an exchange ratio of 1.39 new shares of SunCoke Common Stock per SXCP Common Unit; and (ii) a one-time, special cash distribution of $0.50 for each outstanding publicly-held SXCP Common Unit at closing.

On January 13, 2019, at the direction of the SXCP Conflicts Committee, representatives of Citi delivered to representatives of Evercore the SXCP Conflicts Committee’s response, reflecting the terms discussed at the SXCP Conflicts Committee’s January 12, 2019 meeting, to SunCoke’s January 11, 2019 proposal.

 

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On January 15, 2019, SunCoke responded to SXCP’s January 13, 2019 counterproposal by delivering a further revised proposal to the SXCP Conflicts Committee, contemplating an exchange ratio of 1.39 new shares of SunCoke Common Stock per SXCP Common Unit. In its revised proposal, SunCoke proposed implementing, subject to approval of the SunCoke Board, a quarterly dividend of $0.06 per share of SunCoke Common Stock, or $0.24 per share of SunCoke Common Stock on an annualized basis, beginning with the first full quarterly period after the closing of the Merger.

On January 16, 2019, the SXCP Conflicts Committee held a telephonic meeting to discuss the revised SunCoke proposal with representatives of Akin Gump and Citi. After considering and discussing SunCoke’s revised proposal, the SXCP Conflicts Committee determined it would further consider the terms of the proposed merger before determining whether and the terms on which to deliver a counterproposal to SunCoke. Also at the meeting, the SXCP Conflicts Committee and its advisors discussed updated financial forecasts for SunCoke and SXCP that had been provided on that date, on behalf of SunCoke primarily to reflect SunCoke’s and SXCP’s actual full-year 2018 results and year-end financial position.

On January 17, 2019, the SunCoke Board convened a special telephonic meeting, attended by all seven directors, as well as members of SunCoke management. During this meeting, members of management provided an update on the status of negotiations with the SXCP Conflicts Committee and the most recent counterproposal from the SXCP Conflicts Committee.

On January 18, 2019, Mr. Rippey called Mr. Somerhalder to discuss the SXCP Conflicts Committee’s continued request for a one-time special cash payment as part of the proposed merger consideration and SunCoke’s continued rejection of this request.

On January 19, 2019, the SXCP Conflicts Committee held a telephonic meeting, attended by representatives of Akin Gump and Citi. During the meeting, the SXCP Conflicts Committee and its advisors discussed a potential response to SunCoke’s revised proposal. After the Committee temporarily adjourned the meeting, Mr. Somerhalder called Mr. Rippey to further discuss SunCoke’s revised proposal.

Later on January 19, 2019, the SXCP Conflicts Committee reconvened the telephonic meeting with representatives of Akin Gump and Citi in attendance. Mr. Somerhalder updated the participants on his conversation with Mr. Rippey, and the SXCP Conflicts Committee and its advisors further discussed the terms of SunCoke’s revised proposal. Following this discussion, the SXCP Conflicts Committee determined to respond to SunCoke by proposing: (i) an exchange ratio of 1.40 new shares of SunCoke Common Stock per SXCP Common Unit; and (ii) an assumption that: (w) SunCoke would implement a quarterly dividend of at least $0.06 per share of SunCoke Common Stock, or $0.24 per share of SunCoke Common Stock on an annualized basis, following closing of the Merger; (x) SXCP would continue to declare and pay quarterly cash distributions of at least $0.40 per unit for each fiscal quarter prior to closing of the Merger; (y) the Merger would not close prior to the record date for the distribution relating to the first quarter of 2019; and (z) the SXCP Public Unitholders would receive a final distribution at closing equal to the product of (1) the number of days elapsed from the first day of the most recent fiscal quarter with respect to which a distribution record date has not occurred multiplied by (2) a daily distribution rate equal to the quotient of the most recent regular quarterly cash distribution paid by SXCP divided by 90. On January 20, 2019, at the direction of the SXCP Conflicts Committee, representatives of Citi delivered to representatives of Evercore the SXCP Conflicts Committee’s response, reflecting the terms discussed at the SXCP Conflicts Committee’s January 19, 2019 meeting, to SunCoke’s January 15, 2019 proposal.

On January 22, 2019, SunCoke responded to SXCP’s January 21, 2019 counterproposal by delivering a further revised proposal to the SXCP Conflicts Committee proposing to: (a) cause the exchange of 1.40 new shares of SunCoke Common Stock for each outstanding publicly-held SXCP Common Unit; (b) announce its intention to implement a quarterly dividend, subject to the approval of its Board of Directors, of $0.06 per share of SunCoke Common Stock, or $0.24 per share of SunCoke Common Stock on an annualized basis, with respect to the first full calendar quarter after the closing of the Merger and payable in the quarter thereafter; (c) cause

 

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SXCP to continue to declare and pay quarterly cash distributions of $0.40 per SXCP Common Unit for each fiscal quarter with respect to which the record date occurs prior to closing of the Merger; and (d) cause the SXCP Public Unitholders to receive a final distribution at closing, payable in shares of SunCoke Common Stock (valued as of the date prior to execution of the Merger Agreement) equal to the product of: (i) the number of days elapsed from the first day of the most recent fiscal quarter with respect to which a distribution record date has not occurred multiplied by (ii) a daily distribution rate equal to the quotient of the most recent regular quarterly cash distribution paid by SXCP divided by 90. In making this revised proposal, SunCoke assumed that the Merger would not close prior to the record date for the distribution relating to the first quarter of 2019. This revised proposal, signifying the mutual intent of SunCoke and the SXCP Conflicts Committee, subject to the negotiation, execution and delivery of mutually satisfactory definitive agreements with respect to the Merger, was countersigned by Mr. Somerhalder on behalf of the SXCP Conflicts Committee and delivered to SunCoke on January 29, 2019.

Also on January 22, 2019, on behalf of SunCoke, Baker Botts sent to Akin Gump a revised draft of the Merger Agreement in response to the comments that Akin Gump had sent on January 8, 2019. In the revised draft, SunCoke agreed to certain post-signing restrictions on SunCoke, including limitations on issuance of additional SunCoke equity prior to closing, but rejected the proposal of a termination fee in the event that SunCoke terminated the Merger Agreement following a change of recommendation by the SunCoke Board.

On January 24, 2019, the SXCP Conflicts Committee held a telephonic meeting with representatives of Akin Gump and Citi in attendance. During the meeting, the SXCP Conflicts Committee discussed SunCoke’s January 22, 2019 proposal and the revised draft of the Merger Agreement received from Baker Botts.

On January 25, 2019, on behalf of the SXCP Conflicts Committee, Akin Gump sent to Baker Botts a revised draft of the Merger Agreement, in response to the comments that Baker Botts had sent on January 22, 2019. The revised draft contemplated that, during the period between signing and closing, SunCoke would not be permitted to issue additional equity valued at more than $100 million, and also contemplated a termination fee of $6 million in the event that SunCoke terminated the Merger Agreement following a change of recommendation by the SunCoke Board. Later that afternoon, representatives of Baker Botts, Akin Gump and SunCoke management conferred by telephone regarding the remaining open points in the draft Merger Agreement. During the call, the representatives of SunCoke proposed to agree to: (i) the SXCP Conflicts Committee’s request for a $6 million termination fee in the event that SunCoke terminated the Merger Agreement following a change of recommendation by the SunCoke Board; and (ii) the SXCP Conflicts Committee’s request for a lower limit on equity issuances by SunCoke, if the SXCP Conflicts Committee otherwise agreed to the then-current draft.

On January 26, 2019, the SXCP Conflicts Committee held a telephonic meeting, also attended by representatives of Akin Gump and Citi. Representatives of Akin Gump informed the SXCP Conflicts Committee regarding Akin Gump’s conversation with SunCoke and Baker Botts representatives on the revised draft Merger Agreement.

Later that day, representatives of Akin Gump reported to Baker Botts that the SXCP Conflicts Committee had accepted SunCoke’s revisions to the Merger Agreement as outlined by SunCoke on January 25, 2019, subject to review of the revised draft Merger Agreement reflecting such revisions.

On January 28, 2019, on behalf of SunCoke, Baker Botts sent to Akin Gump a revised draft of the Merger Agreement, reflecting the discussion of January 25, 2019. Also later that day, Baker Botts sent Akin Gump an initial draft of the Support Agreement.

Over the next several days, the parties spoke with frequency regarding open items, including whether separate disclosure schedules were necessary to the Merger Agreement, additional edits to the Merger Agreement, including regarding the formula for SXCP distributions through closing, the Support Agreement and the public disclosure for the announcement of the execution of the Merger Agreement. The parties ultimately determined that no separate disclosure letters were required and instead included the necessary disclosures as schedules to the Merger Agreement.

 

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On February 4, 2019, the SXCP Conflicts Committee held a telephonic meeting, which was attended by representatives of Akin Gump and Citi. During the meeting, Akin Gump reviewed with the SXCP Conflicts Committee the final terms of the Merger Agreement and Support Agreement. Also at this meeting, Citi reviewed with the SXCP Conflicts Committee its financial analysis of the Exchange Ratio and rendered an oral opinion, confirmed by delivery of a written opinion dated February 4, 2019, to the SXCP Conflicts Committee to the effect that, as of such date and based on and subject to various assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken, the Exchange Ratio provided for pursuant to the Merger Agreement was fair, from a financial point of view, to SXCP Public Unitholders. After discussion, the SXCP Conflicts Committee unanimously (i) determined that the Merger Agreement, the Support Agreement and the transactions contemplated thereby are not adverse to, and are in the best interest of, SXCP, including the SXCP Public Unitholders; (ii) approved the Merger Agreement, the Support Agreement and the transactions contemplated thereby, including the Merger, which approval constituted “Special Approval” under the SXCP Partnership Agreement; and (iii) recommended that the SXCP Board approve the Merger Agreement, the Support Agreement and the transactions contemplated thereby, including the Merger. See the section titled “The Merger—Recommendations of the SXCP Conflicts Committee and the SXCP Board and Their Reasons for the Merger.”

Later on February 4, 2019, a special telephonic meeting of the SXCP Board was held. In addition to members of SunCoke management, the meeting was attended by representatives of both Akin Gump and Baker Botts. At the meeting, the SXCP Conflicts Committee reported to the full SXCP Board as to its determinations and its receipt of Citi’s opinion as to the fairness, from a financial point of view, of the Exchange Ratio provided for pursuant to the Merger Agreement. The full SXCP Board discussed the proposed Merger with the SXCP Conflicts Committee. At this meeting, the SXCP Board (acting upon the recommendation of the SXCP Conflicts Committee) unanimously (i) determined that the Merger Agreement and the transactions contemplated thereby were in the best interest of SXCP; (ii) approved the Merger Agreement and the transactions contemplated thereby, including the Merger; and (iii) directed that the Merger Agreement be submitted to a vote of SXCP Common Unitholders and authorized the SXCP Common Unitholders to act by written consent pursuant to Section 13.11 of the SXCP Partnership Agreement.

Also on February 4, 2019, a special telephonic meeting of the SunCoke Board was convened, with members of SunCoke management and representatives of Evercore and Baker Botts also in attendance. At this meeting, at the request of the SunCoke Board, management reviewed the principal terms of the Merger Agreement. Additionally, Evercore reviewed its financial analysis of the Exchange Ratio and rendered an oral opinion, later confirmed by delivery of a written opinion dated February 4, 2019, to the SunCoke Board that, as of such date and based upon and subject to the factors, procedures, assumptions, qualifications and limitations set forth in its opinion, the Exchange Ratio was fair, from a financial point of view, to SunCoke. The SunCoke Board also discussed the potential market reaction to the transaction as well as perceived potential benefits of, and other considerations relating to, the Merger. After discussion, the SunCoke Board unanimously (i) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger and the Parent Stock Issuance, were in the best interests of SunCoke and its stockholders, (ii) approved and declared advisable the Merger Agreement and the transactions contemplated thereby, including the Merger and the Parent Stock Issuance, and (iii) resolved to submit the Parent Stock Issuance to a vote of SunCoke’s stockholders and recommend approval of the Parent Stock Issuance at the SunCoke Special Meeting.

Resolution of Conflicts of Interest; Standards of Conduct and Modification of Duties

The approval of the Merger Agreement and the transactions contemplated thereby, including the Merger, by a majority of the members of the SXCP Conflicts Committee acting in good faith constituted “Special Approval” under the SXCP Partnership Agreement. Under Section 7.9(c) of the SXCP Partnership Agreement, whenever a potential conflict of interest exists, such as consideration of the Merger Agreement and the Merger and other transactions contemplated thereby, any resolution or course of action by the SXCP General Partner or its affiliates in respect of such conflict of interest will be permitted and conclusively deemed approved by SXCP and

 

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by all of the partners of SXCP, and will not constitute a breach of the SXCP Partnership Agreement or of any duty existing at law, in equity or otherwise or obligation of any type, if the resolution or course of action is approved by Special Approval.

Under Section 7.10(b) of the SXCP Partnership Agreement, any action taken or omitted to be taken by the SXCP General Partner in reliance upon the advice or opinion of certain advisers (including legal counsel, accountants, appraisers, management consultants, investment bankers and other consultants and advisors selected by it), as to matters reasonably believed to be in such adviser’s professional or expert competence, will be “conclusively presumed to have been done or omitted in good faith and in accordance with such advice or opinion.”

Recommendations of the SXCP Conflicts Committee and the SXCP Board and Their Reasons for the Merger

The SXCP Conflicts Committee consists of two independent directors, John W. Somerhalder II and Martha Z. Carnes, each of whom was appointed on August 11, 2017, to serve as directors effective as of September 1, 2017, concurrently with the resignations of C. Scott Hobbs, Wayne L. Moore and Nancy M. Snyder. In resolutions approved by the SXCP Board on December 3, 2018, the SXCP Board authorized the SXCP Conflicts Committee to, among other things, (i) review and evaluate the terms and conditions, and determine the advisability, of the proposed Merger; (ii) negotiate, or delegate the ability to negotiate to any persons, with any party the SXCP Conflicts Committee deems appropriate, with respect to the terms and conditions of the proposed Merger; (iii) determine whether to give or withhold the SXCP Conflicts Committee’s approval of the proposed Merger, including by “Special Approval” pursuant to Section 7.9(c) of the SXCP Partnership Agreement; and (iv) make a recommendation to the SXCP Board whether to approve the proposed Merger.

The SXCP Conflicts Committee retained Akin Gump as its legal counsel and Citi as its financial advisor in connection with its evaluation of the proposed Merger. The SXCP Conflicts Committee, among other things, conducted a review and evaluation of SunCoke’s proposal and conducted negotiations with SunCoke and its representatives with respect to the Merger, the Merger Agreement and the Support Agreement.

On February 4, 2019, the SXCP Conflicts Committee unanimously (i) determined that the Merger Agreement and the transactions contemplated thereby are not adverse to, and are in the best interest of, SXCP, including the SXCP Public Unitholders; (ii) approved the Merger Agreement, the Support Agreement and the transactions contemplated thereby, including the Merger, which approval constituted “Special Approval” under the SXCP Partnership Agreement; and (iii) recommended that the SXCP Board approve the Merger Agreement, the Support Agreement and the transactions contemplated thereby, including the Merger.    

Later on February 4, 2019, the SXCP Board (acting upon the recommendation of the SXCP Conflicts Committee) (i) determined that the Merger Agreement and the transactions contemplated thereby are in the best interest of SXCP, (ii) approved the Merger Agreement and the transactions contemplated thereby, including the Merger, and (iii) directed that the Merger Agreement be submitted to a vote of SXCP Common Unitholders and authorized the SXCP Common Unitholders to act by written consent pursuant to Section 13.11 of the SXCP Partnership Agreement.

The SXCP General Partner, the SXCP Conflicts Committee and the SXCP Board have not, including, without limitation, in making the determinations and approvals set forth above, assumed any obligations to SXCP or its limited partners (whether fiduciary, contractual, implied or otherwise) other than those obligations that may exist pursuant to the SXCP Partnership Agreement. Under the SXCP Partnership Agreement, whenever the SXCP General Partner, the SXCP Board or any committee of the SXCP Board (including the SXCP Conflicts Committee) makes a determination or takes any other action in its capacity as the general partner of SXCP then, unless another express standard is provided for in the SXCP Partnership Agreement, the SXCP General Partner, SXCP General Partner, the SXCP Board or such committee must make such determination or take or decline to

 

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take such other action in good faith and is not subject to any higher standard under the SXCP Partnership Agreement or under applicable law. A determination, other action or failure to act by SXCP General Partner, the SXCP Board or any committee thereof (including the SXCP Conflicts Committee) will be deemed to be in good faith unless the SXCP General Partner, the SXCP Board or any committee thereof (including the SXCP Conflicts Committee) believed such determination, other action or failure to act was adverse to the interests of SXCP. Nothing in this joint prospectus/consent statement/proxy statement or the actions or determinations of the SXCP General Partner, the SXCP Board or the SXCP Conflicts Committee described in this joint prospectus/consent statement/proxy statement should be read to mean that the SXCP General Partner, the SXCP Board or the SXCP Conflicts Committee assumed any obligations to SXCP or its limited partners (whether fiduciary, contractual, implied, or otherwise) other than those obligations that may exist pursuant to the SXCP Partnership Agreement. You are urged to read the full text of the SXCP Partnership Agreement, which is incorporated by reference into this joint prospectus/consent statement/proxy statement. See the section titled “Where You Can Find More Information.”

The SXCP Conflicts Committee consulted with its legal and financial advisors and considered various factors in making its determination and approvals with respect to the Merger, the Merger Agreement and the Support Agreement, and the related recommendation to the SXCP Board. The SXCP Conflicts Committee viewed the following factors as generally positive or favorable in arriving at its determination, approvals and recommendation:

 

   

The Exchange Ratio of 1.40 shares of SunCoke Common Stock for each outstanding SXCP Public Unit, which represents an implied premium of approximately 10.4% to the closing price of SXCP Common Units on February 1, 2019, the trading day prior to the date on which the SXCP Conflicts Committee made its determinations regarding the Merger, and approximately 15.3% based on the average exchange ratio between SunCoke Common Stock and SXCP Common Units for the ten-day period ending on February 1, 2019.

 

   

SXCP Public Unitholders will be entitled to receive a prorated distribution per SXCP Public Unit, payable in SunCoke Common Stock and based on a quarterly distribution of $0.40 per unit, for the period beginning with the first day of the most recent full calendar quarter with respect to which an SXCP distribution record date has not occurred (or, if there is no such full calendar quarter, then beginning with the first day of the partial calendar quarter in which the closing occurs) and ending on the day prior to the closing of the Merger.

 

   

SunCoke’s status as a corporation following the Merger provides a number of potential benefits relative to SXCP’s MLP structure, including that:

 

   

corporations generally attract a broader investor base as compared to MLPs because certain types of institutional investors face prohibitions or limitations on investing in entities other than corporations;

 

   

SXCP Public Unitholders will have enhanced voting and other rights as stockholders of a corporation as compared to unitholders of an MLP controlled by a general partner; and

 

   

SunCoke Common Stock is expected to have greater liquidity than SXCP Public Units given the larger average daily trading volume of SunCoke Common Stock resulting from its broader investor base and larger public float.

 

   

The combined company will not be subject to the potential cost-of-capital burden resulting from the incentive distributions payable to SunCoke, which could from time to time make it more challenging for SXCP to pursue accretive acquisitions and relatively more expensive to fund its capital program.

 

   

The SXCP Conflicts Committee’s belief that the Merger presents a better opportunity to obtain value for the SXCP Public Unitholders, based on a comparison of the Merger against the SXCP status quo and in light of the IRS’ January 2017 decision to exclude cokemaking as a qualifying income generating activity in its final regulations issued in relation to the qualifying income exception for publicly traded partnerships.

 

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The Merger is expected to improve the combined company’s credit profile and strengthen the combined company’s balance sheet by allowing it to retain a higher proportion of internally generated cash flow and potentially lower the combined company’s cost of capital, thereby allowing it to reduce its debt financing requirements, fund its maintenance capital requirements (including the anticipated significant cost of repairing and replacing SXCP’s heat recovery steam generation facilities) and improve its ability to pursue acquisitions and growth opportunities.

 

   

The Merger provides SXCP Public Unitholders with equity ownership in SunCoke, an entity expected to have better access to equity capital markets to fund growth projects.

 

   

In receiving SunCoke Common Stock in the Merger, SXCP Public Unitholders will be provided an opportunity to participate in the potential growth at SunCoke’s Indiana Harbor facility.

 

   

The financial presentation and opinion, dated February 4, 2019, of Citi to the SXCP Conflicts Committee as to the fairness, from a financial point of view and as of such date, of the Exchange Ratio provided for pursuant to the Merger Agreement, which opinion was based on and subject to various assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken as more fully described below in the section titled “Opinion of the SXCP Conflicts Committee’s Financial Advisor.”

 

   

The SXCP Conflicts Committee’s belief that the Merger Consideration represented the greatest amount of consideration that SunCoke was willing to agree to pay at the time of the SXCP Conflicts Committee’s determination and approval.

 

   

The Merger will simplify SunCoke’s and SXCP’s structure and eliminate potential conflicts of interest between SunCoke and SXCP.

 

   

The Merger is expected to create synergies in the form of cost savings and other efficiencies as a result of maintaining one public company rather than two.

 

   

The Exchange Ratio is fixed and therefore the implied value of the consideration payable to SXCP Public Unitholders will increase in the event that the market price of SunCoke Common Stock increases prior to the closing of the Merger.

 

   

SunCoke’s stated intention to initiate a quarterly dividend after the closing of the Merger at an annual rate of $0.24 per share.

 

   

The terms of the Merger Agreement, principally:

 

   

the pre-closing covenants applicable to SunCoke providing protection to SXCP Public Unitholders by restricting SunCoke’s ability to take certain actions prior to the closing of the Merger that could reduce the value of the Merger Consideration;

 

   

SunCoke’s obligation to use reasonable commercial efforts to cause SXCP to declare and pay regular quarterly cash distributions at the quarterly rate of $0.40 per SXCP Common Unit, with the declaration date and record date for each quarterly distribution to occur no later than 35 and 47 days, respectively, after the end of each fiscal quarter;

 

   

the provisions requiring the consent of the SXCP Conflicts Committee to any amendment of or granting of a consent or waiver under the Merger Agreement;

 

   

SunCoke’s obligation to pay a termination fee and/or an expense reimbursement amount to SXCP Partners in certain circumstances in connection with termination of the Merger Agreement (as described under “The Merger Agreement—Termination” and “The Merger Agreement—Expense Reimbursement and Termination Fee”); and

 

   

that the consummation of the Merger is not conditioned on financing.

 

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The lack of significant regulatory hurdles to consummation of the Merger increases the probability that the Merger will be completed.

 

   

The probability that SXCP and SunCoke will be able to consummate the Merger is significantly increased by the Support Agreement, requiring SC&C to provide a written consent in favor of the Merger Agreement and Merger, which is the only SXCP Common Unitholder approval required to be obtained.

 

   

The SXCP Conflicts Committee’s belief that potential alternative transactions with third parties were not achievable given SunCoke’s control of the SXCP General Partner.

 

   

In addition, the SXCP Conflicts Committee considered a number of other factors relating to procedural safeguards involved in the negotiation of the Merger Agreement, including those discussed below, each of which supported its determination with respect to the Merger:

 

   

In connection with its consideration of the Merger, the SXCP Conflicts Committee selected and retained its own legal and financial advisors with knowledge and experience with respect to public merger and acquisition transactions, MLPs, SunCoke’s and SXCP’s industry generally, and SunCoke and SXCP particularly, as well as substantial experience advising publicly traded MLPs and other companies with respect to transactions similar to the Merger;

 

   

The terms and conditions of the Merger were determined through arm’s-length negotiations between the SXCP Conflicts Committee and the SunCoke Board and management and their respective representatives and advisors;

 

   

The SXCP Conflicts Committee had no obligation to approve or recommend any transaction; and

 

   

The members of the SXCP Conflicts Committee have served on the SXCP Board and are familiar with, and understand, the businesses, assets, liabilities, results of operations, financial condition and competitive positions and prospects of SunCoke.

The SXCP Conflicts Committee viewed the following factors as generally negative or unfavorable in arriving at its determination, approvals and recommendation:

 

   

The SXCP Public Unitholders will receive shares of SunCoke Common Stock that are expected, over the medium term, to pay a lower dividend as compared to the current distribution on SXCP Public Units on a standalone basis.

 

   

The Merger should be a taxable transaction to the SXCP Public Unitholders for U.S. federal income tax purposes. See the section titled “Material U.S. Federal Income Tax Consequences.”

 

   

Following the Merger, the income of the resulting combined entity will be subject to double taxation (at the combined company and shareholder levels) for U.S. federal income tax purposes, while income of SXCP is currently subject to only one level of tax (at the unitholder level).

 

   

The Exchange Ratio is fixed and therefore the implied value of the consideration payable to SXCP Public Unitholders will decrease in the event that the market price of SunCoke Common Stock decreases prior to the closing of the Merger.

 

   

The SXCP Conflicts Committee was not authorized to and did not conduct an auction process or other solicitation of interest from third parties for the acquisition of SXCP or its assets. Since SunCoke indirectly controls SXCP, the SXCP Conflicts Committee believed that it was unrealistic to expect an unsolicited third-party acquisition proposal to acquire the assets or control of SXCP, and it was unlikely that the SXCP Conflicts Committee could conduct a meaningful process to solicit interest in the acquisition of the assets or control of SXCP.

 

   

SunCoke owns a sufficient number of SXCP Common Units to approve the Merger Agreement and the Merger without the approval of the SXCP Public Unitholders, and there is no requirement for separate approval by the SXCP Public Unitholders.

 

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There is risk that the potential benefits expected to be realized in the Merger might not be fully realized, or might not be realized within the expected time period.

 

   

The Merger may not be completed in a timely manner, or at all, which could result in significant costs and disruption to SXCP’s normal business or negatively impact the trading price of SXCP Common Units.

 

   

While no specific issues came to the attention of the SXCP Conflicts Committee with respect to information it was provided, the SXCP Conflicts Committee was aware that SunCoke, as the control party of SXCP, controlled the delivery and presentation of information that the SXCP Conflicts Committee received for purposes of evaluating the Merger and the Merger Agreement.

 

   

Certain terms of the Merger Agreement, principally:

 

   

that the Merger is conditioned upon receiving the Parent Stock Issuance Approval;

 

   

the provisions allowing the SunCoke Board to make a SunCoke Adverse Recommendation Change (as described under “The Merger Agreement—SunCoke Board Recommendation and SunCoke Adverse Recommendation Change”); and

 

   

the provisions allowing for the termination of the Merger Agreement under certain circumstances following a SunCoke Adverse Recommendation Change (as described under “The Merger Agreement—Termination”).

 

   

SXCP Public Unitholders are not entitled to appraisal rights under the Merger Agreement, the SXCP Partnership Agreement or Delaware law.

 

   

SXCP Public Unitholders will be foregoing the potential benefits that could be realized by remaining common unitholders of a standalone entity.

 

   

SunCoke Common Stock may not trade at the expected valuations.

 

   

The resulting combined company might not achieve its projected financial results or expected synergies.

 

   

Litigation may be commenced in connection with the Merger and such litigation may increase costs and result in a diversion of management focus.

 

   

Some of SXCP’s directors and executive officers may have interests in the Merger that are different from, or in addition to, those of the SXCP Public Unitholders.

 

   

The risks of the type and nature described under the heading “Information Regarding Forward-Looking Statements” in this joint prospectus/consent statement/proxy statement.

The foregoing discussion of the information and factors considered by the SXCP Conflicts Committee is not intended to be exhaustive, but includes material factors the SXCP Conflicts Committee considered. In view of the variety of factors and the quality and amount of information considered, the SXCP Conflicts Committee as a whole did not find it practicable to and did not quantify or otherwise assign relative weights to the specific factors considered in reaching its determination but conducted an overall evaluation of the Merger. Individual members of the SXCP Conflicts Committee may have given different relative considerations to different factors. Overall, the SXCP Conflicts Committee believed that the positive factors supporting the Merger outweighed the negative factors it considered.

The explanation of the reasoning of the SXCP Conflicts Committee and certain information presented in this section are forward-looking in nature and, therefore, the information should be read in light of the factors discussed in the sections titled “Information Regarding Forward-Looking Statements” and “Risk Factors.”

In reaching its conclusions regarding the Merger, the SXCP Board not only considered the process by which the SXCP Conflicts Committee has made its recommendations but also considered the matters described above or considered by the SXCP Conflicts Committee. As in the case of the SXCP Conflicts Committee, in view of the variety of factors and the quality and amount of information considered, the SXCP Board as a whole did not find

 

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it practicable to and did not quantify or otherwise assign relative weights to the specific factors considered in reaching its determination but conducted an overall review of the Merger. Individual members of the SXCP Board may have given different relative considerations to different factors.

Unaudited Financial Projections of SunCoke and SXCP

Neither SunCoke nor SXCP routinely publishes projections as to long-term future performance, earnings or dividends and distributions. In connection with the proposed Merger, management of SunCoke prepared non-public projections relating to the future financial and operating performance of SunCoke and SXCP with respect to the fiscal years ending December 31, 2019 through 2023. The projections summarized below were provided to the SXCP Conflicts Committee, the SXCP Board and the SunCoke Board in connection with their analysis of the Merger. These financial projections also were provided to SunCoke’s financial advisor, Evercore, and to the SXCP Conflicts Committee’s financial advisor, Citi, for their use and reliance in connection with their respective analyses and opinions described under the headings “—Opinion of SunCoke’s Financial Advisor” and “—Opinion of the SXCP Conflicts Committee’s Financial Advisor,” respectively. The summary of these projections is included below because these projections were made available to the SXCP Conflicts Committee, the SXCP Board, the SunCoke Board and their respective financial advisors in connection with the proposed Merger.

You should be aware that uncertainties are inherent in prospective financial information of any kind, and such uncertainties may increase with the passage of time. None of SunCoke or SXCP or any of their affiliates, advisors, officers, directors, or representatives has made or makes any representation or can give any assurance to any SXCP Common Unitholder or SunCoke Stockholder, or any other person, regarding the ultimate performance of SXCP or SunCoke compared to the summarized information set forth below or that any such results will be achieved.

The inclusion of the following summary projections in this joint prospectus/consent statement/proxy statement should not be regarded as an indication that SXCP, SunCoke, or their respective advisors or other representatives considered or consider the projections to be necessarily predictive of actual future performance or events, and the summary projections set forth below should not be relied upon as such.

The SunCoke and SXCP projections summarized below were prepared by management of SunCoke. The SunCoke and SXCP projections were not prepared with a view toward public disclosure or toward compliance with generally accepted accounting principles (“GAAP”), the published guidelines of the SEC, or the guidelines established by the American Institute of Certified Public Accountants. Neither KPMG LLP (“KPMG”), nor any other independent registered public accounting firm, has compiled, examined or performed any procedures with respect to the prospective financial information contained in the projections, and accordingly, KPMG does not express an opinion or any other form of assurance with respect thereto. KPMG has not given advice or consultation in connection with the proposed Merger. The KPMG reports incorporated by reference into this joint prospectus/consent statement/proxy statement with respect to SunCoke and SXCP relate to historical financial information of SunCoke and SXCP, respectively. Such reports do not extend to the projections included below and should not be read to do so. Neither the SXCP Board nor the SunCoke Board prepared, and none of the SXCP Board, the SXCP Conflicts Committee, the SXCP General Partner, SXCP Board or the SunCoke Board gives any assurance regarding, the summarized information to any SXCP Common Unitholder or SunCoke Stockholder.

The financial projections are inherently subjective in nature, susceptible to interpretation and, accordingly, such projections may not be achieved. The financial projections also reflect numerous assumptions made by management, including material assumptions that may not be realized and are subject to significant uncertainties and contingencies, all of which are difficult to predict and many of which are beyond the control of the preparing party. SunCoke management also prepares financial projections that include prospective projects, which are risked

 

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based on the status of each project’s probability of success and final approval, among other factors. The financial projections that include risked prospective projects are reviewed alongside the other projections in the ordinary course. As noted therein, the financial projections presented to the SXCP Conflicts Committee included the effects of risked prospective projects. Prospective mergers and acquisitions were excluded from the financial projections. Accordingly, there can be no assurance that the assumptions made in preparing the financial projections upon which the foregoing projected financial information was based will be realized. There may be differences between actual and projected results, and the differences may be material. The risk that these uncertainties and contingencies could cause the assumptions to fail to be reflective of actual results is further increased by the length of time over which these assumptions apply. The failure to achieve assumptions and projections in early periods could have a compounding effect on the projections shown for the later periods. Thus, any such failure of an assumption or projection to be reflective of actual results in an early period could have a greater effect on the projected results failing to be reflective of actual events in later periods.

All of these assumptions involve variables making them difficult to predict, and some are beyond the control of SunCoke and SXCP. Although SunCoke’s management believes that there was a reasonable basis for its projections and underlying assumptions, any assumptions for near-term projected cases remain uncertain, and such uncertainty increases with the length of the projected period. The projections are forward-looking statements and are subject to risks and uncertainties. See the section titled “Information Regarding Forward-Looking Statements.”

In developing the financial projections provided to the SXCP Conflicts Committee, SunCoke’s management made numerous material assumptions with respect to SunCoke and SXCP for the fiscal years ending December 31, 2019 through 2023, including:

 

   

the cash flow from existing assets and business activities;

 

   

expected volume and pricing for cokemaking and logistic contract renewals;

 

   

organic growth opportunities and potential economic terms;

 

   

capital expenditures and operating cash flows, including the related amounts and timing thereof;

 

   

outstanding debt during applicable periods, and the availability and cost of funding; and

 

   

other general business, market, and financial assumptions.

The summarized projected financial information set forth below was based on SunCoke’s and SXCP’s projected results for the fiscal years ending December 31, 2019 through 2023 with respect to the projections (may reflect rounding).

 

     Year Ended December 31,  
     2019      2020      2021      2022      2023  
     (Dollars in millions)  

SunCoke:

              

Standalone SunCoke Adjusted EBITDA (1)

   $ 47      $ 69      $ 67      $ 70      $ 65  

SXCP Distributions(2)

   $ 47      $ 47      $ 47      $ 47      $ 47  

Cash Available for Dividends – Adjusted(3)

   $ 84      $ 93      $ 79      $ 63      $ 67  

SXCP:

              

Adjusted EBITDA attributable to SXCP(4)

   $ 219      $ 227      $ 232      $ 237      $ 217  

Distributable Cash Flow(5)

   $ 100      $ 104      $ 106      $ 129      $ 114  

Total Distributed Cash Flow(6)

   $ 75      $ 75      $ 75      $ 75      $ 75  

 

(1)

Standalone SunCoke Adjusted EBITDA is a non-GAAP measure of financial performance. Adjusted EBITDA represents earnings before interest, taxes, depreciation and amortization (“EBITDA”), adjusted for non-recurring items and excluding the impact of transaction costs related to the simplification transaction. Standalone SunCoke Adjusted

 

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  EBITDA refers to adjusted EBITDA attributable to SunCoke excluding GP/LP distributions from SXCP and cash distributions made by Indiana Harbor in respect of non-controlling interests and related capital expenditure reimbursements, and includes SunCoke’s 100% interests in Jewell Coke, Brazil, and Dismal River Terminal, 85.2% interest in Indiana Harbor, 2% interests in Middletown, Haverhill, and Granite City, and SunCoke’s corporate and other costs.
(2)

SunCoke’s GP/LP distributions from SXCP.

(3)

Cash Available for Dividends – Adjusted is a non-GAAP measure of financial performance and is defined as Standalone SunCoke Adjusted EBITDA, computed as described above, less standalone maintenance capital expenditures, interest expense, cash taxes, and excluding certain noncash items. Adjustment includes adding back one-time oven rebuild costs at Indiana Harbor ($40 million of capital expenditures and $10 million of operating expenses) in 2019.

(4)

Adjusted EBITDA attributable to SXCP is a non-GAAP measure of financial performance. Adjusted EBITDA represents EBITDA, adjusted for non-recurring items and excluding the impact of transaction costs related to the simplification transaction. Adjusted EBITDA attributable to SXCP includes 100% interests in Convent Marine Terminal, Kanawha River Terminal, and Lake Terminal, 98.0% interests in Middletown, Haverhill, and Granite City, and SXCP’s corporate costs.

(5)

Distributable Cash Flow is a non-GAAP measure of financial performance and is defined as Adjusted EBITDA attributable to SXCP, computed as described above, less net cash paid for interest expense, ongoing capital expenditures, accruals for replacement capital expenditures, cash taxes, and adjusted for deferred revenue.

(6)

Total distributions paid by SXCP to its general partner and limited partners assuming a $0.40 per unit quarterly distribution.

NEITHER SXCP NOR SUNCOKE INTEND TO UPDATE OR OTHERWISE REVISE THE ABOVE PROSPECTIVE FINANCIAL INFORMATION TO REFLECT CIRCUMSTANCES EXISTING AFTER THE DATE SUCH PROSPECTIVE FINANCIAL INFORMATION WAS PREPARED OR TO REFLECT THE OCCURRENCE OF SUBSEQUENT EVENTS, EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING SUCH PROSPECTIVE FINANCIAL INFORMATION ARE NO LONGER APPROPRIATE.

Opinion of the SXCP Conflicts Committee’s Financial Advisor

The SXCP Conflicts Committee has engaged Citi to act as its financial advisor in connection with the proposed Merger. In connection with Citi’s engagement, the SXCP Conflicts Committee requested that Citi evaluate the fairness, from a financial point of view, of the Exchange Ratio provided for pursuant to the Merger Agreement. On February 4, 2019, at a meeting of the SXCP Conflicts Committee held to evaluate the proposed Merger, Citi rendered an oral opinion, confirmed by delivery of a written opinion dated February 4, 2019, to the SXCP Conflicts Committee to the effect that, as of that date and based on and subject to various assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken, the Exchange Ratio provided for pursuant to the Merger Agreement was fair, from a financial point of view, to holders of SXCP Public Units.

The full text of Citi’s written opinion, dated February 4, 2019, which describes the assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken, is attached as Annex B to this joint prospectus/consent statement/proxy statement and is incorporated into this joint prospectus/consent statement/proxy statement by reference. The description of Citi’s opinion set forth below is qualified in its entirety by reference to the full text of Citi’s opinion. Citi’s opinion was provided for the information of the SXCP Conflicts Committee (in its capacity as such) in connection with its evaluation of the Exchange Ratio from a financial point of view and did not address any other terms, aspects or implications of the Merger. Citi expressed no view as to, and its opinion did not address, the underlying business decision of SXCP General Partner to effect or enter into the Merger, the relative merits of the Merger as compared to any alternative business strategies that might exist for SXCP or the effect of any other transaction which SXCP might

 

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engage in or consider. Citi’s opinion is not intended to be and does not constitute a recommendation to any securityholder as to how such securityholder should vote or act on any matters relating to the proposed Merger or otherwise.

In arriving at its opinion, Citi:

 

   

reviewed a draft, dated February 3, 2019, of the Merger Agreement;

 

   

held discussions with certain senior officers, directors and other representatives of SXCP General Partner and certain senior officers and other representatives of SunCoke concerning the businesses, operations and prospects of SXCP and SunCoke;

 

   

reviewed certain publicly available and other business and financial information relating to SXCP and SunCoke provided to or discussed with Citi by the respective managements of SXCP General Partner and SunCoke, including certain financial forecasts and other information and data relating to SXCP and SunCoke provided to or discussed with Citi by the managements of SXCP General Partner and SunCoke, in each case as reviewed and approved for Citi’s use by the SXCP Conflicts Committee;

 

   

reviewed certain information and data relating to potential strategic implications and financial and operational benefits (including the amount, timing and achievability thereof) anticipated by the management of SunCoke to result from the Merger;

 

   

reviewed the financial terms of the Merger as set forth in the Merger Agreement in relation to, among other things, current and historical market prices of SXCP Common Units and SunCoke Common Stock, the financial condition and historical and projected cash flows and other operating data of SXCP and SunCoke and the capitalization of SXCP and SunCoke;

 

   

analyzed certain financial, stock market and other publicly available information relating to the businesses of certain other companies whose operations Citi considered relevant in evaluating those of SXCP and SunCoke;

 

   

considered, to the extent publicly available, the financial terms of certain other transactions which Citi considered relevant in evaluating the Merger;

 

   

reviewed certain potential pro forma financial effects of the Merger utilizing the financial forecasts and other information and data relating to SXCP and SunCoke and the potential strategic implications and financial and operational benefits referred to above; and

 

   

conducted such other analyses and examinations and considered such other information and financial, economic and market criteria as Citi deemed appropriate in arriving at its opinion.

In rendering its opinion, Citi assumed and relied, without independent verification, upon the accuracy and completeness of all financial and other information and data publicly available or provided to or otherwise reviewed by or discussed with Citi and upon the assurances of the managements and other representatives of SXCP General Partner and SunCoke that they were not aware of any relevant information that was omitted or that remained undisclosed to Citi. With respect to the financial forecasts and other information and data (including estimates as to the tax attributes of SunCoke on a standalone basis and after giving effect to the Merger as expected by the management of SunCoke to be utilized by SunCoke) that Citi was directed to utilize in its analyses, Citi was advised by the managements of SXCP General Partner and SunCoke, and Citi assumed, with the SXCP Conflicts Committee’s consent, that they were reasonably prepared on bases reflecting the best currently available estimates and judgments of such managements, as applicable, as to, and were a reasonable basis upon which to evaluate, the future financial performance of SXCP and SunCoke, the potential strategic implications and financial and operational benefits (including the amount, timing and achievability thereof) anticipated by the management of SunCoke to result from, and other potential pro forma financial effects of, the Merger and the other matters covered thereby. Citi expressed no view or opinion as to any financial forecasts and other information or data (or underlying assumptions on which any such financial forecasts and other information

 

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or data are based) provided to or otherwise reviewed by or discussed with Citi and Citi assumed, with the SXCP Conflicts Committee’s consent, that the financial results, including with respect to the potential strategic implications and financial and operational benefits anticipated to result from the Merger, reflected in such financial forecasts and other information and data would be realized in the amounts and at the times projected.

Citi relied, at the SXCP Conflicts Committee’s direction, upon the assessments of the managements of SXCP General Partner and SunCoke, as the case may be, as to, among other things, (i) the potential impact on SXCP and SunCoke of market, seasonal, cyclical, competitive and other trends and developments in and prospects for, and governmental, regulatory and legislative matters relating to or otherwise affecting, the coke production, coal, bulk terminaling and steel manufacturing industries and the geographic regions in which SXCP and SunCoke operate, including energy and commodity pricing and supply and demand for coal and steel, which are subject to significant volatility and which, if different than as assumed, could have a material impact on Citi’s analyses or opinion, (ii) existing and future contracts and relationships, agreements and arrangements with, and the ability to attract, retain and/or replace, key customers, employees, suppliers, service providers and other commercial relationships of SXCP and SunCoke, and (iii) the ability of SunCoke to integrate the operations of SXCP and SunCoke. Citi assumed, with the SXCP Conflicts Committee’s consent, that there would be no developments with respect to any such matters that would have an adverse effect on SXCP, SunCoke or the Merger (including the contemplated benefits thereof) or that otherwise would be meaningful in any respect to Citi’s analyses or opinion.

Citi did not make, and it was not provided with, an independent evaluation or appraisal of the assets or liabilities (contingent, accrued, derivative, off-balance sheet or otherwise) of SXCP, SunCoke or any other entity and Citi did not make any physical inspection of the properties or assets of SXCP, SunCoke or any other entity. Citi did not evaluate the solvency or fair value of SXCP, SunCoke or any other entity under any state, federal or other laws relating to bankruptcy, insolvency or similar matters. Citi expressed no view or opinion as to the potential impact on SXCP, SunCoke or any other entity of any pending or potential litigation, claims or governmental, regulatory or other proceedings, enforcement actions, consent decrees or other orders or investigations. Citi assumed, with the SXCP Conflicts Committee’s consent, that the Merger would be consummated in accordance with its terms and in compliance with all applicable laws, documents and other requirements, without waiver, modification or amendment of any material term, condition or agreement, and that, in the course of obtaining the necessary governmental, regulatory or third party approvals, consents, releases, waivers and agreements for the Merger or otherwise, no delay, limitation, restriction, condition or other action, including any divestiture or other requirements, amendments or modifications, would be imposed or occur that would have an adverse effect on SXCP, SunCoke or the Merger (including the contemplated benefits thereof) or that otherwise would be meaningful in any respect to Citi’s analyses or opinion. Citi also assumed, with the SXCP Conflicts Committee’s consent, that the Merger would qualify for the intended tax treatment contemplated by the Merger Agreement. Citi’s opinion, as set forth therein, relates to the relative values of SXCP and SunCoke. Citi did not express any view or opinion as to the value of any securities (including SXCP Common Units or general partner interests and incentive distribution rights (“IDRs”) in SXCP) held by SunCoke, Merger Sub, SXCP General Partner, SXCP or their respective affiliates, the actual value of SunCoke Common Stock or any other securities when issued or retained in the Merger or the prices at which SunCoke Common Stock, SXCP Common Units or any other securities will trade or otherwise be transferable at any time, including following the announcement or consummation of the Merger. Representatives of SXCP General Partner advised Citi, and Citi further assumed, that the final terms of the Merger Agreement did not vary materially from those set forth in the draft reviewed by Citi. Citi did not express any view or opinion with respect to accounting, tax, regulatory, legal or similar matters, including, without limitation, as to tax or other consequences of the Merger or otherwise or changes in, or the impact of, tax and other laws, regulations and governmental and legislative policies affecting SXCP, SunCoke or the Merger (including the contemplated benefits thereof), and Citi relied, with the SXCP Conflicts Committee’s consent, upon the assessments of representatives of SXCP General Partner as to such matters.

 

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Citi’s opinion addressed only the fairness, from a financial point of view and as of the date of such opinion, of the Exchange Ratio (to the extent expressly specified therein), without regard to individual circumstances of specific holders with respect to any rights, preferences, restrictions or limitations (whether by virtue of control, voting, liquidity or otherwise) which may distinguish such holders or the securities of SXCP held by such holders and Citi’s analyses and opinion did not address, take into consideration or give effect to any rights, preferences, restrictions or limitations that may be attributable to any such securities nor did Citi’s opinion in any way address any other consideration payable in connection with the Merger or proportionate allocation or relative fairness. Citi’s opinion did not address any terms (other than the Exchange Ratio to the extent expressly specified therein), aspects or implications of the Merger, including, without limitation, the form or structure of the Merger or any terms, aspects or implications of any support or other agreement, arrangement or understanding to be entered into in connection with or contemplated by the Merger or otherwise. In connection with Citi’s engagement, Citi was not requested to, and it did not, undertake a third-party solicitation process on behalf of SXCP with respect to the acquisition of all or a part of SXCP. Citi expressed no view as to, and its opinion did not address, the fairness (financial or otherwise) of the amount or nature or any other aspect of any compensation or other consideration to any officers, directors or employees of any parties to the Merger, or any class of such persons, relative to the Exchange Ratio or otherwise. Citi’s opinion was necessarily based upon information available, and financial, stock market and other conditions and circumstances existing and disclosed, to Citi as of the date of its opinion. Although subsequent developments may affect its opinion, Citi has no obligation to update, revise or reaffirm its opinion. As the SXCP Conflicts Committee was aware, the credit, financial and stock markets, and the industries in which SXCP and SunCoke operate, have experienced and continue to experience volatility and Citi expressed no view or opinion as to any potential effects of such volatility on SXCP, SunCoke or the Merger (including the contemplated benefits thereof). The issuance of Citi’s opinion was authorized by Citi’s fairness opinion committee.

In preparing its opinion, Citi performed a variety of financial and comparative analyses, including those described below. The summary of the analyses below is not a complete description of Citi’s opinion or the analyses underlying, and factors considered in connection with, Citi’s opinion. The preparation of a financial opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a financial opinion is not readily susceptible to summary description. Citi arrived at its ultimate opinion based on the results of all analyses and factors assessed as a whole, and it did not draw, in isolation, conclusions from or with regard to any one factor or method of analysis. Accordingly, Citi believes that the analyses must be considered as a whole and that selecting portions of its analyses and factors or focusing on information presented in tabular format, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying such analyses and its opinion.

In its analyses, Citi considered industry performance, general business, economic, market and financial conditions and other matters existing as of the date of its opinion, many of which are beyond the control of SXCP and SunCoke. No company, business or transaction reviewed is identical or directly comparable to SXCP, SunCoke or the Merger and an evaluation of these analyses is not entirely mathematical; rather, the analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the public trading, acquisition or other values of the companies, businesses or transactions reviewed or the results from any particular analysis.

The estimates contained in Citi’s analyses and the ranges resulting from any particular analysis are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by such analyses. In addition, analyses relating to the value of businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold or acquired. Accordingly, the estimates used in, and the results derived from, Citi’s analyses are inherently subject to substantial uncertainty.

 

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Citi was not requested to, and it did not, recommend or determine the specific consideration payable in the Merger. The type and amount of consideration payable in the Merger were determined through negotiations between the SXCP Conflicts Committee and SunCoke and the decision on behalf of SXCP to enter into the Merger Agreement was solely that of the SXCP Conflicts Committee and the SXCP Board. Citi’s opinion was only one of many factors considered by the SXCP Conflicts Committee in its evaluation of Exchange Ratio and should not be viewed as determinative of the views of the SXCP Conflicts Committee, the SXCP Board or SXCP General Partner management with respect to the Merger or the consideration payable in the Merger.

Financial Analyses

The summary of the financial analyses described below under this heading “—Financial Analyses” is a summary of the material financial analyses prepared and reviewed with the SXCP Conflicts Committee in connection with Citi’s opinion, dated February 4, 2019. The summary set forth below does not purport to be a complete description of the financial analyses performed by, and underlying the opinion of, Citi, nor does the order of the financial analyses described represent the relative importance or weight given to those financial analyses by Citi. Certain financial analyses summarized below include information presented in tabular format. In order to fully understand the financial analyses, the tables must be read together with the text of each summary as the tables alone do not constitute a complete description of the financial analyses. Considering the data in the tables below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the financial analyses, could create a misleading or incomplete view of such financial analyses. Future results may be different from those described and such differences may be material. For purposes of the financial analyses described below, the term (i) “adjusted EBITDA” refers to earnings before interest, taxes, depreciation and amortization, excluding certain non-recurring items, as applicable, and (ii) “SunCoke’s asset EBITDA” refers to adjusted EBITDA attributable to SunCoke excluding its limited partner interests in SXCP, referred to as LP interests, its general partner interests and related IDRs in SXCP, referred to as GP/IDR interests, and cash distributions made by Indiana Harbor in respect of non-controlling interests and related capital expenditure reimbursements. Approximate implied per unit and per share equity value reference ranges (other than such ranges derived from historical unit or stock trading histories and Wall Street research analysts’ unit or stock price targets) were rounded to the nearest $0.05 and approximate implied value reference ranges for SunCoke’s asset EBITDA and cash taxes were rounded to the nearest $5 million. Financial data utilized for SXCP and SunCoke in the financial analyses described below, to the extent based on financial forecasts and estimates of management, were based on financial forecasts and other information and data relating to SXCP and SunCoke provided to or discussed with Citi by the respective managements of SXCP and SunCoke (in each case as reviewed and approved for Citi’s use by the SXCP Conflicts Committee), referred to in this section as the SXCP forecasts and SunCoke forecasts, respectively.

In calculating implied exchange ratio reference ranges as reflected in the financial analyses described below, other than the selected precedent transactions analysis, Citi divided the low-ends (or high-ends, as the case may be) of the approximate implied per unit equity value reference ranges derived for SXCP from such analyses by the high-ends (or low-ends, as the case may be) of the approximate implied per share equity value reference ranges derived for SunCoke from such analyses in order to calculate the low-ends (or high-ends) of the implied exchange ratio reference ranges. In calculating an implied exchange ratio reference range as reflected in the selected precedent transactions analysis described below, Citi divided the low-end (or high-end, as the case may be) of the approximate implied per unit equity value reference range derived for SXCP from such analysis by the high-end (or low-end, as the case may be) of the approximate implied per share equity value reference range derived for SunCoke from the selected public companies analysis of SunCoke described below in order to calculate the low-end (or high-end) of such implied exchange ratio reference range.

Selected Public Companies Analyses. Citi performed separate selected public companies analyses of SXCP (on a consolidated basis) and SunCoke (on a sum-of-the-parts basis) in which Citi reviewed certain financial and stock market information relating to SXCP, SunCoke and the selected publicly traded entities listed or referred to below.

 

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SXCP. In its selected public companies analysis of SXCP, Citi reviewed certain financial and stock market information relating to SXCP and the following 12 selected publicly traded entities that Citi considered generally relevant, consisting of seven industrial process suppliers, referred to as the selected industrial process suppliers, one company with operations in the bulk terminaling industry, referred to as the selected bulk terminaling company, and four master limited partnerships, referred to as MLPs, with operations focused on the metals and mining industry, referred to as the selected M&M-focused MLPs, and, together with the selected industrial process suppliers and the selected bulk terminaling company, collectively referred to as the SXCP selected companies:

Selected Industrial Process Suppliers

   

Cabot Corporation

   

Compass Minerals International, Inc.

   

GrafTech International Ltd.

   

Harsco Corporation

   

Koppers Holdings Inc.

   

Minerals Technologies Inc.

   

PQ Group Holdings Inc.

Selected Bulk Terminaling Company

   

Westshore Terminals Investment Corporation

Selected M&M-Focused MLPs

   

Alliance Resource Partners, L.P.

   

Ciner Resources LP

   

Foresight Energy LP

   

Natural Resource Partners L.P.

Citi reviewed, among other information and to the extent publicly available, enterprise values, calculated, as applicable, as implied equity values based on closing unit or stock prices on February 1, 2019, plus implied general partner value, consolidated total debt, preferred equity and non-controlling interests and less consolidated cash and cash equivalents, as a multiple of calendar year 2019 and calendar year 2020 estimated adjusted EBITDA. Financial data of the SXCP selected companies were based on publicly available Wall Street research analysts’ estimates and public filings. Financial data of SXCP was based on the SXCP forecasts, publicly available Wall Street research analysts’ estimates and public filings.

The overall low to high calendar year 2019 and calendar year 2020 estimated adjusted EBITDA multiples observed for the selected industrial process suppliers were 4.4x to 8.3x (with a median of 6.8x) and 4.2x to 7.7x (with a median of 6.4x), respectively, and for the selected M&M-focused MLPs were 4.1x to 5.9x (with a median of 5.3x) and 4.2x to 6.3x (with a median of 5.3x), respectively. The calendar year 2019 and calendar year 2020 estimated adjusted EBITDA multiples observed for the selected bulk terminaling company were 6.9x and 6.2x, respectively. Citi noted that the calendar year 2019 and calendar year 2020 estimated adjusted EBITDA multiples for SXCP were 6.3x and 6.2x, respectively, based on publicly available Wall Street research analysts’ estimates. Citi then applied selected ranges of calendar year 2019 and calendar year 2020 estimated adjusted EBITDA multiples derived from the SXCP selected companies of 5.7x to 7.0x and 5.4x to 6.5x, respectively, to corresponding data of SXCP based on the SXCP forecasts.

This analysis indicated an approximate implied per unit equity value reference range for SXCP of $9.15 to $15.00.

SunCoke. Citi performed a selected public companies analysis of SunCoke on a sum-of-the-parts basis to derive an approximate implied per share equity value reference range for SunCoke based on approximate implied values for (i) SunCoke’s asset EBITDA, (ii) SunCoke’s LP interests, and (iii) SunCoke’s GP/IDR interests.

 

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In evaluating SunCoke’s asset EBITDA, Citi reviewed certain financial information relating to SunCoke’s asset EBITDA and certain financial and stock market information relating to the selected industrial process suppliers and the selected bulk terminaling company, collectively referred to as the SunCoke selected companies, including the overall low to high (and median) calendar year 2019 and calendar year 2020 estimated adjusted EBITDA multiples observed for the selected industrial process suppliers and the calendar year 2019 and calendar year 2020 estimated adjusted EBITDA multiples observed for the selected bulk terminaling company described above under “—Selected Public Companies Analyses—SXCP.” Financial data relating to SunCoke’s asset EBITDA was based on the SunCoke forecasts. Citi then applied selected ranges of calendar year 2019 and calendar year 2020 estimated adjusted EBITDA multiples derived from the SunCoke selected companies of 6.2x to 7.6x and 5.6x to 6.9x, respectively, to SunCoke’s asset EBITDA. This analysis indicated an approximate implied value reference range for SunCoke’s asset EBITDA of $340 million to $415 million.

In evaluating SunCoke’s LP interests, Citi utilized the approximate implied per unit equity value reference range derived for SXCP of $9.15 to $15.00 from the selected public companies analysis of SXCP described above under “—Selected Public Companies Analyses—SXCP,” which indicated an approximate implied value reference range for SunCoke’s LP interests of $261 million to $427 million.

In evaluating SunCoke’s GP/IDR interests, Citi reviewed the calendar year 2019 estimated cash distributions associated with SunCoke’s GP/IDR interests and SXCP’s current (as of February 1, 2019) indicative distribution yield. Financial data of SunCoke’s GP/IDR interests was based on the SXCP forecasts and publicly available information. This analysis indicated an approximate implied value for SunCoke’s GP/IDR interests of $13 million.

The analyses described above for SunCoke on a sum-of-the-parts basis indicated an overall approximate implied per share equity value reference range for SunCoke of $10.85 to $14.60.

Utilizing the approximate implied per unit equity value reference range derived for SXCP and the overall approximate implied per share equity value reference range derived for SunCoke as described above, Citi calculated the following implied exchange ratio reference range, as compared to the Exchange Ratio:

 

Implied Exchange Ratio Reference Range

   Exchange Ratio

0.627x – 1.382x

   1.400x

Selected Precedent Transactions Analysis. Using publicly available information, Citi reviewed financial data relating to the following 18 selected transactions that Citi considered generally relevant as transactions involving acquisitions by general partners of their respective affiliated MLPs with operations in the natural resources industry, referred to as the SXCP selected precedent transactions:

 

Announced   Acquiror   Seller/Target
November 26, 2018  

• ArcLight Energy Partners Fund VI, L.P.

 

• TransMontaigne Partners L.P.

November 26, 2018  

• Dominion Energy, Inc.

 

• Dominion Energy Midstream Partners, LP

October 22, 2018  

• EnLink Midstream, LLC

 

• EnLink Midstream Partners, LP

October 18, 2018  

• Valero Energy Corporation

 

• Valero Energy Partners LP

October 9, 2018  

• Antero Midstream GP LP

 

• Antero Midstream Partners LP

September 28, 2018  

• ArcLight Energy Partners Fund V, L.P.

 

• American Midstream Partners, LP

September 18, 2018  

• Enbridge Inc.

 

• Enbridge Energy Partners, L.P.

August 24, 2018  

• Enbridge Inc.

 

• Spectra Energy Partners, LP

August 1, 2018  

• Energy Transfer Equity, L.P.

 

• Energy Transfer Partners, L.P.

March 26, 2018  

• Tallgrass Energy GP, LP

 

• Tallgrass Energy Partners, LP

 

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Announced   Acquiror   Seller/Target
January 2, 2018  

• Archrock, Inc.

 

• Archrock Partners, L.P.

February 1, 2017  

• ONEOK, Inc.

 

• ONEOK Partners, L.P.

May 31, 2016  

• SemGroup Corporation

 

• Rose Rock Midstream, L.P.

November 3, 2015  

• Targa Resources Corp.

 

• Targa Resources Partners LP

May 6, 2015  

• Crestwood Equity Partners LP

 

• Crestwood Midstream Partners LP

November 12, 2014  

• Enterprise Products Partners L.P.

 

• Oiltanking Partners, L.P.

August 10, 2014  

• Kinder Morgan, Inc.

 

• El Paso Pipeline Partners, L.P.

August 10, 2014  

• Kinder Morgan, Inc.

 

• Kinder Morgan Energy Partners, L.P.

Citi reviewed, among other information, the premiums implied by the consideration paid or proposed to be paid in the SXCP selected precedent transactions based on closing unit prices of the target partnerships involved in such transactions one trading day prior to the public announcement date of the relevant transaction and average closing unit prices of such target partnerships over the 30-day period prior to such announcement date. Financial data of the SXCP selected precedent transactions were based on public filings and other publicly available information. Unit price information of SXCP was based on publicly available market data.

The overall low to high one-day and average 30-day premiums observed for the SXCP selected precedent transactions were (3.9)% to 25.8% (with a mean of 8.8% and a median of 9.3%) and (8.7)% to 26.9% (with a mean of 10.1% and a median of 9.4%), respectively. Citi then applied selected ranges of premiums derived from the SXCP selected precedent transactions of 0% to 25.8% and 0% to 26.9% to SXCP’s closing unit price on February 1, 2019 and average closing unit prices over the 30-day period prior to February 1, 2019, respectively. This analysis indicated an approximate implied per unit equity value reference range for SXCP of $13.10 to $16.55.

Utilizing the approximate implied per unit equity value reference range derived for SXCP as described above and the overall approximate implied per share equity value reference range derived for SunCoke described above under “—Selected Public Companies Analyses—SunCoke,” Citi calculated the following implied exchange ratio reference range, as compared to the Exchange Ratio:

 

Implied Exchange Ratio Reference Range

   Exchange Ratio

0.897x – 1.525x

   1.400x

Discounted Cash Flow Analyses. Citi performed separate discounted cash flow analyses of SXCP (on a consolidated basis) and SunCoke (on a sum-of-the-parts basis).

SXCP. Citi performed a discounted cash flow analysis of SXCP by calculating the estimated present value of the unlevered free cash flows that SXCP was forecasted to generate during the fiscal years ending December 31, 2019 through December 31, 2023 based on the SXCP forecasts. Citi calculated implied terminal values for SXCP by applying to SXCP’s fiscal year 2023 estimated adjusted EBITDA a selected range of terminal adjusted EBITDA multiples of 5.7x to 7.0x. The present values (as of January 1, 2019) of the cash flows and terminal values were then calculated using a selected range of discount rates of 8.3% to 9.8%. This analysis indicated an approximate implied per unit equity value reference range for SXCP of $14.10 to $19.60.

SunCoke. Citi performed a discounted cash flow analysis of SunCoke on a sum-of-the-parts basis to derive an approximate implied per share equity value reference range for SunCoke based on approximate implied values for (i) SunCoke’s asset EBITDA, (ii) SunCoke’s LP interests and (iii) SunCoke’s GP/IDR interests, after taking into account SunCoke’s estimated cash taxes, based on the SunCoke forecasts.

In evaluating SunCoke’s asset EBITDA, Citi performed a discounted cash flow analysis of SunCoke’s asset EBITDA by calculating the estimated present value of the unlevered free cash flows associated with SunCoke’s

 

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asset EBITDA during the fiscal years ending December 31, 2019 through December 31, 2023 based on the SunCoke forecasts. Citi calculated terminal values for SunCoke’s asset EBITDA by applying to SunCoke’s estimated asset EBITDA for fiscal year 2023 a selected range of terminal adjusted EBITDA multiples of 6.2x to 7.6x. The present values (as of January 1, 2019) of the cash flows and terminal values were then calculated using a selected range of discount rates of 10.3% to 11.6%. This analysis indicated an approximate implied value reference range for SunCoke’s asset EBITDA of $350 million to $420 million.

In evaluating SunCoke’s LP interests, Citi utilized the approximate implied per unit equity value reference range derived for SXCP of $14.10 to $19.60 from the discounted cash flow analysis of SXCP described above under “—Discounted Cash Flow Analyses—SXCP,” which indicated an approximate implied aggregate value reference range for SunCoke’s LP interests of $402 million to $559 million.

In evaluating SunCoke’s GP/IDR interests, Citi utilized the approximate implied value derived for SunCoke’s GP/IDR interests of $13 million from the analysis of SunCoke’s GP/IDR interests described above under “—Selected Public Companies Analyses—SunCoke.”

In evaluating SunCoke’s cash taxes, Citi performed a discounted cash flow analysis of SunCoke’s cash taxes by calculating the estimated present value of such cash taxes, taking into account SunCoke’s expected utilization of tax attributes, during the fiscal years ending December 31, 2019 through December 31, 2023 based on the SunCoke forecasts. Citi calculated a terminal value for such cash taxes assuming no growth in SunCoke’s cash taxes after the fiscal year ending December 31, 2023. The present values (as of January 1, 2019) of the cash taxes and terminal values were then calculated using a selected range of discount rates of 11.8% to 15.0%. This analysis indicated an approximate implied value reference range for SunCoke’s cash taxes of $145 million to $190 million.

The analyses described above for SunCoke on a sum-of-the-parts basis indicated an overall approximate implied per share equity value reference range for SunCoke of $10.95 to $13.75.

Utilizing the approximate implied per unit equity value reference range derived for SXCP and the overall approximate implied per share equity value reference range derived for SunCoke as described above, Citi calculated the following implied exchange ratio reference range, as compared to the Exchange Ratio:

 

Implied Exchange Ratio Reference Range

   Exchange Ratio

1.025x – 1.790x

   1.400x

Has/Gets. Citi compared the approximate implied per unit equity value reference ranges derived for SXCP on a standalone basis described above under “—Selected Public Companies Analyses—SXCP” and “—Discounted Cash Flow Analyses—SXCP” relative to illustrative approximate implied per unit equity values on a pro forma basis derived from a selected public companies analysis and a discounted cash flow analysis of the combined company based on the Exchange Ratio and after taking into account the potential cost savings anticipated by the management of SunCoke to result from the Merger. Citi utilized, in the case of such selected public companies analysis, selected ranges of calendar year 2019 and calendar year 2020 estimated adjusted EBITDA multiples of 5.7x to 7.6x and 5.4x to 6.9x, respectively, and, in the case of such discounted cash flow analysis, a selected range of terminal adjusted EBITDA multiples of 5.7x to 7.6x and a selected range of discount rates of 8.3% to 9.8%. Financial data of SXCP was based on the SXCP forecasts and public filings. Financial data of the pro forma combined company was based on the SXCP forecasts, SunCoke forecasts and public filings.

Citi observed that the pro forma ownership of SXCP Public Unitholders in the combined company implied by the Exchange Ratio indicated that the Merger could result in approximate implied per unit equity values on a pro forma basis derived from the selected public companies analysis and discounted cash flow analysis described above of $13.15 to $20.65 and $16.25 to $23.25, respectively (relative to $9.15 to $15.00 and $14.10 to $19.60, respectively, on a standalone basis). Actual results achieved by SXCP, SunCoke and the pro forma combined company may vary from forecasted results and variations may be material.

 

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Certain Additional Information

Citi also observed certain additional information that was not considered part of its financial analyses with respect to its opinion but was noted for informational purposes, including the following:

 

   

historical closing prices of SXCP Common Units and SunCoke Common Stock during the 52-week period ended February 1, 2019, which indicated during such period low and high closing prices for SXCP Common Units and SunCoke Common Stock of approximately $9.91 and $19.65 per unit and $7.76 and $14.14 per share, respectively, and an implied exchange ratio reference range of 1.080x to 1.990x;

 

   

publicly available Wall Street research analysts’ price targets for SXCP Common Units and SunCoke Common Stock, which indicated overall low to high target price ranges for SXCP Common Units and SunCoke Common Stock of $14.00 to $20.00 (with a median of $19.50) per unit and $14.00 to $15.00 (with a median of $14.00) per share, respectively, and an implied exchange ratio reference range of 0.933x to 1.429x; and

 

   

certain illustrative pro forma financial effects of the Merger on, among other things, SXCP’s estimated distributable cash flow per unit and SunCoke’s estimated cash available for dividends per share for calendar year 2019 (before giving effect to certain one-time, non-recurring expenses in such year) and calendar years 2020 through 2023, and SXCP’s estimated distributions per unit in such years, based on the SXCP forecasts, the SunCoke forecasts and publicly available information and after taking into account expected regular quarterly cash dividends to holders of SunCoke Common Stock following consummation of the Merger and the potential cost savings anticipated by the management of SunCoke to result from the Merger, which indicated that the Merger could be:

 

   

relative to SXCP on a standalone basis, accretive to SXCP’s estimated distributable cash flow per unit by approximately 18.3% to 36.1% during calendar year 2019 through calendar year 2023 and dilutive to SXCP’s estimated distributions per unit by approximately (79.0)% during such calendar years; and

 

   

relative to SunCoke on a standalone basis, accretive to SunCoke’s estimated cash available for dividends per share by approximately 21.1% to 63.1% during calendar year 2019 through calendar year 2023.

Actual results achieved by SXCP, SunCoke and the pro forma combined company may vary from forecasted results and variations may be material.

Miscellaneous

SXCP has agreed to pay Citi for its services in connection with the proposed Merger an aggregate fee of $3 million, of which a portion was payable upon Citi’s engagement, a portion was payable upon the delivery of Citi’s opinion and $2.5 million is payable contingent upon consummation of the Merger. SXCP also has agreed to reimburse Citi for Citi’s expenses, including fees and expenses of counsel, and to indemnify Citi and related parties against certain liabilities, including liabilities under federal securities laws, arising from Citi’s engagement.

As the SXCP Conflicts Committee was aware, Citi and its affiliates in the past have provided, currently are providing and in the future may provide investment banking, commercial banking and other similar financial services to SXCP, SXCP General Partner, SunCoke and/or certain of their respective affiliates unrelated to the proposed Merger, for which services Citi and its affiliates received and expect to receive compensation, including, during the two-year period prior to the date of Citi’s opinion, having acted or acting (i) in the case of SXCP, as (a) joint book-running manager and an initial purchaser for a debt offering of SXCP and an affiliate thereof and (b) a lender under a credit facility of SXCP and certain of its affiliates and (ii) in the case of SunCoke, as (a) a lender under a credit facility of SunCoke and (b) agent on behalf of SunCoke in connection with certain purchases of SXCP Common Units. For the services described in clauses (i) and (ii) above, Citi and

 

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its affiliates received during such two-year period aggregate fees of approximately $1.5 million from SXCP and SunCoke. In the ordinary course of business, Citi and its affiliates may actively trade or hold the securities of SXCP, SunCoke and their respective affiliates for their own account or for the account of customers and, accordingly, may at any time hold a long or short position in such securities. In addition, Citi and its affiliates (including Citigroup Inc. and its affiliates) may maintain relationships with SunCoke, SXCP General Partner, SXCP and their respective affiliates.

The SXCP Conflicts Committee selected Citi to act as financial advisor in connection with the proposed Merger based on Citi’s reputation, experience and familiarity with SXCP, SunCoke and their respective businesses. Citi is an internationally recognized investment banking firm that regularly engages in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive bids, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes.

Recommendation of the SunCoke Board and Its Reasons for the Merger

On February 4, 2019, the SunCoke Board (i) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger and the Parent Stock Issuance, are in the best interests of SunCoke and its stockholders, (ii) approved and declared advisable the Merger Agreement and the transactions contemplated thereby, including the Merger and the Parent Stock Issuance, and (iii) resolved to submit the Parent Stock Issuance to a vote of SunCoke’s stockholders and recommend approval of the Parent Stock Issuance.

The SunCoke Board considered many factors in making its determination and recommendation. The SunCoke Board consulted with its financial and legal advisors and viewed the following factors as being generally positive or favorable in coming to its determination and related recommendation:

 

   

The Merger is expected to simplify the SunCoke organizational structure and create a larger float which is expected to result in improved trading liquidity. The simplified structure is expected to lower the cost of capital, improve consolidated credit metrics, improve access to and cost of debt financing and provide opportunities for synergies.

 

   

The Merger is expected to provide flexibility to further delever the consolidated balance sheet and accelerate the pace of debt repayment.

 

   

The Merger is anticipated to enhance SunCoke’s ability to fund acquisitions and growth projects with internally generated cash flow, as well as expand the universe of SunCoke’s growth opportunities by eliminating SXCP’s current qualifying income limitations on pursuing certain growth opportunities.

 

   

Evercore rendered its oral opinion, subsequently confirmed by delivery of a written opinion, dated February 4, 2019, that, as of such date and based upon and subject to the various assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Evercore as set forth in the written opinion, the Exchange Ratio was fair, from a financial point of view, to SunCoke.

 

   

The SunCoke Board has reviewed with its financial and legal advisors the financial and other terms of the Merger Agreement and related documents, including the conditions to the parties’ respective obligations and the termination provisions, including the contractual obligation of SC&C to support the Merger pursuant to the Support Agreement.

 

   

The SunCoke Board is familiar with, and understands, the businesses, assets, liabilities, results of operations, financial condition, and competitive positions and prospects of SunCoke and SXCP.

The following factors are generally negative or unfavorable in making a determination and recommendation with respect to the Merger:

 

   

The Merger is expected to be immediately dilutive to SunCoke Stockholders.

 

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The Exchange Ratio is fixed and therefore the value of the Exchange Ratio payable to SXCP Public Unitholders will increase in the event that the market price of SunCoke Common Stock increases prior to the Closing.

 

   

There is risk that the potential benefits sought in the Merger might not be fully realized.

 

   

There is a risk that SunCoke would be required to pay a termination fee to SXCP if the Merger Agreement is terminated under certain specified circumstances.

There is risk that the Merger might not be completed in a timely manner, or that the Merger might not be consummated at all as a result of a failure to satisfy the conditions contained in the Merger Agreement, including as a result of a failure to obtain Parent Stock Issuance Approval, and a failure to complete the Merger could negatively affect the trading price of SunCoke Common Stock.

After taking into account all of the factors set forth above, as well as others, the SunCoke Board concluded that the potential benefits of the Merger outweighed any negative or unfavorable considerations and determined that the Merger Agreement and the transactions contemplated thereby, including, without limitation, the Merger and the Parent Stock Issuance, are in the best interests of SunCoke and its stockholders.

The foregoing discussion is not intended to be exhaustive, but is intended to address the material information and principal factors considered by the SunCoke Board in considering the Merger. In view of the number and variety of factors and the amount of information considered, the SunCoke Board did not find it practicable to, and did not make specific assessments of, quantify or otherwise assign relative weights to, the specific factors considered in reaching its determination. In addition, the SunCoke Board did not undertake to make any specific determination as to whether any particular factor, or any aspect of any particular factor, was favorable or unfavorable to its ultimate determination, and individual members of the SunCoke Board may have given different weights to different factors. The SunCoke Board made its recommendation based on the totality of information presented to, and the investigation conducted by, the SunCoke Board. It should be noted that certain statements and other information presented in this section are forward-looking in nature and, therefore, should be read in light of the factors discussed under the heading “Information Regarding Forward-Looking Statements.”

Opinion of SunCoke’s Financial Advisor

The SunCoke Board retained Evercore to act as financial advisor to the SunCoke Board in connection with evaluating the Merger. On February 4, 2019, at a meeting of the SunCoke Board and at the request of the SunCoke Board, Evercore rendered its oral opinion to the SunCoke Board that, as of February 4, 2019, and based upon and subject to the factors, procedures, assumptions, qualifications and limitations set forth in its opinion, the Exchange Ratio is fair, from a financial point of view, to SunCoke. Evercore subsequently confirmed its oral opinion in a written opinion on the same date.

The full text of the written opinion of Evercore, dated as of February 4, 2019, which sets forth, among other things, the procedures followed, assumptions made, matters considered and qualifications and limitations on the scope of review undertaken in rendering its opinion, is attached hereto as Annex C to this joint prospectus/consent statement/proxy statement. You are urged to read Evercore’s opinion carefully and in its entirety. Evercore’s opinion was addressed to, and provided for the information and benefit of, the SunCoke Board in connection with its evaluation of the fairness of the Exchange Ratio from a financial point of view to SunCoke, and did not address any other aspects or implications of the Merger. Evercore’s opinion should not be construed as creating any fiduciary duty on Evercore’s part to any party and such opinion is not intended to be, and does not constitute, a recommendation to the SunCoke Board or to any other persons in respect of the Merger, including as to how any SunCoke Stockholder or SXCP unitholder should act or vote in respect of the Parent Stock Issuance Proposal or the Merger, as applicable. The summary of the Evercore opinion set forth herein is qualified in its entirety by reference to the full text of the opinion included as Annex C.

 

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In connection with rendering its opinion and performing its related financial analysis, Evercore, among other things:

 

   

reviewed certain publicly available business and financial information relating to SunCoke and SXCP that Evercore deemed to be relevant, including the Annual Report on Form 10-K for the year ended December 31, 2017, the Quarterly Reports on Form 10-Q for the quarters ended March 31, 2018, June 30, 2018 and September 30, 2018, and certain Current Reports on Form 8-K, in each case as filed with or furnished to the U.S. Securities and Exchange Commission by SunCoke or SXCP, as applicable, since January 1, 2018;

 

   

reviewed certain non-public historical and projected financial and operating data and assumptions relating to SunCoke and SXCP prepared and furnished to Evercore by management of SunCoke and SXCP and reviewed and approved for Evercore’s use by the management of SunCoke and SXCP;

 

   

reviewed certain projected cost savings and U.S. federal income tax synergies to result from the Merger (the “Projected Cost Savings and Synergies”) prepared and furnished to Evercore by management of SunCoke and SXCP and reviewed and approved for Evercore’s use by the management of SunCoke and SXCP;

 

   

discussed the past and current operations, financial projections and current financial condition of SunCoke and SXCP and the Projected Cost Savings and Synergies with management of SunCoke and SXCP, including their views on the risks and uncertainties associated therewith;

 

   

reviewed publicly-available research analysts’ estimates for each of SunCoke’s and SXCP’s future financial performance on a standalone basis;

 

   

reviewed the reported prices and the historical trading activity of shares of the SunCoke Common Stock and the SXCP Common Units since April 20, 2017;

 

   

performed discounted cash flow analyses on SunCoke and SXCP based on forecasts and other data provided by management of SunCoke and SXCP;

 

   

compared the financial performance of SunCoke and SXCP, utilizing forecasts and other data provided by management of SunCoke and SXCP, and each of their stock market trading multiples with those of certain other publicly traded partnerships and companies that Evercore deemed relevant;

 

   

compared the financial performance of SunCoke and SXCP, utilizing forecasts and other data provided by management of SunCoke and SXCP, and the valuation multiples relating to the Merger with those of certain other transactions that Evercore deemed relevant;

 

   

reviewed a draft of the Merger Agreement dated February 4, 2019; and

 

   

performed such other analyses and examinations, held such other discussions, reviewed such other information and considered such other factors and information that Evercore deemed appropriate for the purposes of providing its opinion.

For purposes of its analysis and opinion, Evercore assumed and relied upon, without undertaking any independent verification of, the accuracy and completeness of all of the information publicly available, and all of the information supplied or otherwise made available to, discussed with, or reviewed by Evercore, and Evercore assumes no liability therefor. With respect to the projected financial and operating data relating to SunCoke and SXCP referred to above and the Projected Cost Savings and Synergies, Evercore assumed that such data was reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of management of SunCoke and SXCP as to the future financial performance of SunCoke and SXCP under the assumptions reflected therein. Evercore did not express a view as to any projected financial data relating to SunCoke or SXCP or the Projected Cost Savings and Synergies or the assumptions on which they are based. Evercore has relied, at the direction of the SunCoke Board, without independent verification, upon the assessments of the management of SunCoke and SXCP as to the future financial and operating performance of SunCoke and SXCP.

 

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For purposes of rendering its opinion, Evercore assumed, in all respects material to its analysis, that the representations and warranties of each party contained in the Merger Agreement are true and correct, that each party will perform all of the covenants and agreements required to be performed by it under the Merger Agreement, that all conditions to the consummation of the Merger will be satisfied without material waiver or modification thereof, and that the Exchange Ratio will not be adjusted from 1.40 shares of SunCoke Common Stock per SXCP Common Unit. Evercore has further assumed, in all respects material to its analysis, that all governmental, regulatory or other consents, approvals or releases necessary for the consummation of the Merger will be obtained without any material delay, limitation, restriction or condition.

Evercore did not make, nor assume any responsibility for making any independent valuation or appraisal of any assets or liabilities of SunCoke or SXCP, nor was Evercore furnished with any such valuations or appraisals, nor did Evercore evaluate the solvency or fair value of SunCoke or SXCP under any state or federal laws relating to bankruptcy, insolvency or similar matters. Evercore’s opinion was necessarily based upon information made available to Evercore as of the date of its opinion and financial, economic, monetary, market, regulatory and other conditions and circumstances as they existed and as could be evaluated by Evercore on the date of its opinion. It is understood that subsequent developments or information of which Evercore was not aware may affect this opinion and that Evercore does not have any obligation to update, revise or reaffirm its opinion.

Evercore was not asked to pass upon, and expressed no opinion with respect to, any matter other than the fairness, as of the date of its opinion, of the Exchange Ratio to SunCoke, from a financial point of view. Evercore did not express any view on, and its opinion does not address, the fairness of the Merger to, or any exchange ratio received in connection therewith by, the holders of any securities, creditors or other constituencies of SunCoke or SXCP, nor as to the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of SunCoke or SXCP, or any class of such persons, whether relative to the Exchange Ratio or otherwise. Evercore assumed that any modification to the structure of the Merger Agreement would not vary in any respect material to its analysis. Evercore’s opinion did not address the relative merits of the Merger as compared to other business or financial strategies that might have been available to SunCoke or SXCP, nor did it address the underlying business decision of SunCoke to engage in the Merger. In arriving at its opinion, Evercore was not authorized to solicit, and did not solicit, interest from any third party with respect to any other extraordinary transaction involving SunCoke or SXCP. Evercore’s opinion did not constitute a recommendation to SunCoke or to any other persons in respect of the Merger, including as to how any holder of shares of the SunCoke Common Stock should vote in respect of the Parent Stock Issuance Proposal or the Merger, as applicable. Evercore expressed no opinion as to the price at which the shares of the SunCoke Common Stock would trade at any time. Evercore is not a legal, regulatory, accounting or tax expert and assumed the accuracy and completeness of assessments by SunCoke, SXCP and their advisors with respect to legal, regulatory, accounting and tax matters.

Set forth below is a summary of the material financial analyses performed by Evercore and reviewed with the SunCoke Board on February 4, 2019, in connection with rendering Evercore’s opinion to the SunCoke Board. Each analysis was provided to the SunCoke Board. The following summary, however, does not purport to be a complete description of the analyses performed by Evercore. In connection with arriving at its opinion, Evercore considered all of its analyses as a whole, and the order of the analyses described and the results of these analyses do not represent any relative importance or particular weight given to these analyses by Evercore. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data that existed on February 1, 2019, and is not necessarily indicative of current market conditions.

Analysis of SXCP

Assumptions with Respect to SXCP

Evercore performed a series of analyses to derive indicative valuation ranges for the SXCP Common Units. Evercore performed its analyses utilizing the financial projections for SXCP provided by management of SXCP

 

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(the “SXCP Financial Projections”). A summary of the SXCP Financial Projections are available in “The Merger—Unaudited Financial Projections of SunCoke and SXCP” above. The SXCP Financial Projections were not adjusted by Evercore.

Discounted Cash Flow Analysis

Evercore performed a discounted cash flow analysis of SXCP by valuing the cash flows to be received by SXCP based on the SXCP Financial Projections. Evercore calculated the per unit value range for SXCP Public Units by utilizing a range of discount rates based on SXCP’s Weighted Average Cost of Capital (“WACC”), as estimated by Evercore based on the Capital Asset Pricing Model (“CAPM”) and SXCP’s non-traditional MLP and bulk terminal MLP peers, and terminal values based on a range of estimated EBITDA exit multiples and perpetuity growth rates. Evercore assumed a range of discount rates of 8.0% to 9.5%, a range of EBITDA exit multiples of 7.5x to 9.5x and a range of perpetuity growth rates of 0.0% to 2.0%. For both the EBITDA exit multiple and perpetuity growth rate methodologies, Evercore adjusted the SXCP Public Unit value to incorporate the net present value of the projected cash tax benefit resulting from remedial income allocations to SunCoke (“Remedial Allocations”), which result in the holders of SXCP Public Units being allocated less than their pro-rata share of SXCP’s income, based on a 10.0% equity cost of capital, which was derived from the CAPM utilizing SXCP’s non-traditional MLP and bulk terminal MLP peers and Evercore’s professional judgment. The Discounted Cash Flow analysis utilizing the EBITDA exit multiple methodology to calculate terminal value resulted in an implied equity value per SXCP Public Unit range of $17.91 to $26.09. The Discounted Cash Flow Analysis utilizing the perpetuity growth rate methodology to calculate terminal value resulted in an implied equity value per SXCP Public Unit range of $11.07 to $22.45.

Precedent M&A Transaction Analysis

Evercore reviewed selected transactions that Evercore deemed to have certain characteristics similar to those of SXCP, including transactions involving (i) fee-based raw materials processing assets and (ii) bulk terminal assets.

Evercore reviewed transactions involving fee-based raw materials processing assets announced since January 2014 and selected eight transactions involving assets that Evercore deemed to have certain characteristics that are similar to those of SXCP’s cokemaking assets, although Evercore noted that none of the selected transactions or the selected companies or partnerships that participated in the selected transactions were directly comparable to SXCP’s cokemaking assets:

 

Date
Announced

  

Acquiror / Target

05/12/17

  

Enviva Partners, LP / 50.4% of Enviva Port of Wilmington, LLC (Enviva Wilmington Holdings, LLC)

10/17/16

  

Enviva Partners, LP / 100% of Enviva Pellets Sampson, LLC (Enviva Wilmington Holdings, LLC)

12/14/15

  

Enviva Partners, LP / 100% of Southampton Plant (Enviva Holdings, LP)

07/21/15

  

SunCoke Energy Partners, L.P. / 23.0% of Granite City Coke Facility (SunCoke Energy, Inc.)

05/22/15

  

AS Graanul Invest / SIA Latgran (BillerudKorsnas)

01/12/15

  

SunCoke Energy Partners, L.P. / 75.0% of Granite City Coke Facility (SunCoke Energy, Inc.)

09/30/14

  

Enviva Partners, LP / Green Circle Energy Inc. (JCE Group Aktiebolag)

04/23/14

  

SunCoke Energy Partners, L.P. / 33.0% of Haverhill and Middletown cokemaking facilities (SunCoke Energy, Inc.)

Evercore noted that the mean and median of the implied Enterprise Value (defined below) to EBITDA multiples for the selected fee-based raw materials processing transactions were equal to 7.6x and 7.7x, respectively.

 

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Evercore reviewed selected transactions involving bulk terminal infrastructure assets announced since December 2012 and selected 18 transactions involving assets that Evercore deemed to have certain characteristics that are similar to those of SXCP’s logistics assets, although Evercore noted that none of the selected transactions or the selected companies or partnerships that participated in the selected transactions were directly comparable to SXCP’s logistics assets:

 

Date
Announced

  

Acquiror

  

Target

  

Seller

10/30/18   

Inter Terminals Ltd.

  

European Bulk Liquid Storage Business

  

NuStar Energy L.P.

10/10/18   

Green Plains Inc.

  

Ethanol Storage and Transportation Assets

  

Green Plains Partners LP

06/29/18   

Ergon Asphalt & Emulsions, Inc.

  

Three Asphalt Terminals

  

Blueknight Energy Partners, L.P.

06/18/18   

Institutional Investors

  

Marine Products Terminals

  

American Midstream Partners, LP

02/26/18   

Delek Logistics Partners, LP

  

Big Spring Logistics

  

Delek U.S.

10/31/17   

Blueknight Energy Partners, L.P.

  

Asphalt Terminal

  

Ergon, Inc.

02/15/17   

Martin Midstream Partners L.P.

  

Asphalt Terminal Facility

  

Martin Resources Management Corporation

07/16/16   

Blueknight Energy Partners, L.P.

  

Nine Asphalt and Emulsions Terminals

  

Ergon, Inc.

02/02/16   

Blueknight Energy Partners, L.P.

  

Two Asphalt Terminaling Facilities

  

Axeon Specialty Products, LLC

01/04/16   

Green Plains Partners LP

  

Ethanol Storage and Transportation Assets

  

Green Plains, Inc.

07/21/15   

SunCoke Energy Partners, L.P.

  

Convent Marine Terminal

  

Raven Energy Holdings

12/09/14   

Sprague Resources LP

  

Kildair Service Ltd.

  

Sprague Canadian Properties, LLC

10/01/14   

Delek Logistics Partners, LP

  

Mount Pleasant Terminal and Related Logistics Assets

  

Magellan Midstream Partners, L.P.

06/18/14   

World Point Terminals, LP

  

Two Terminals with Storage Capability for Asphalt, Crude Oil, Distillates and Residual Fuels

  

NuStar Energy L.P.

12/10/13   

American Midstream Partners, LP

  

Blackwater Midstream Holdings, LLC

  

Affiliate of ArcLight Capital Partners, LLC

08/06/13   

SunCoke Energy Partners, L.P.

  

Kanawha River Terminals LLC

  
06/26/13   

SunCoke Energy Partners, L.P.

  

Lakeshore Coal Handling Corporation

  

Beemsterboer Corporation

12/21/12   

EQT Infrastructure II

  

Bulk Liquid Storage Solutions

  

Contanda, formerly Westway Terminals

Evercore noted that the mean and median of the implied Enterprise Value to EBITDA multiples for the selected bulk terminal transactions were each equal to 8.2x.

 

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Based on Evercore’s review of the selected precedent transactions, Evercore derived a range of relevant implied multiples of Enterprise Value to EBITDA of 7.0x to 8.5x for fee-based raw materials processing precedent transactions and 7.0x to 9.0x for bulk terminals precedent transactions. Evercore then applied these ranges of selected multiples to 2018 adjusted EBITDA for each of SXCP’s relevant businesses. After adjusting for debt and cash as of January 1, 2019, and dividing by total units outstanding as of January 1, 2019, Evercore determined a range of value per SXCP Common Unit of $15.94 to $23.70.

Peer Group Trading Analysis

Evercore performed a peer group trading analysis of SXCP by reviewing and comparing the market values and trading multiples of the following five publicly traded partnerships that Evercore deemed to have certain characteristics that are similar to those of SXCP, including size and asset base, divided into non-traditional master limited partnerships (“MLPs”) and bulk terminals MLPs:

Non-Traditional MLPs:

 

   

Ciner Resources LP

 

   

Enviva Partners, LP

 

   

Martin Midstream Partners L.P.

Bulk Terminals MLPs:

 

   

Blueknight Energy Partners, L.P.

 

   

Sprague Resources LP

Although the peer groups were utilized to value the SXCP Public Units for purposes of this analysis, no partnership used in the Peer Group Trading Analysis is identical or directly comparable to SXCP. In order to calculate peer group trading multiples, Evercore relied on publicly available filings with the SEC and equity research analyst estimates.

For each of the peer group partnerships, Evercore calculated the following trading multiples:

 

   

Enterprise Value/2019 EBITDA, which is defined as market value of equity, plus debt and preferred units, less cash (“Enterprise Value”), divided by estimated adjusted EBITDA for the calendar year 2019; and

 

   

Enterprise Value/2020 EBITDA, which is defined as Enterprise Value divided by estimated adjusted EBITDA for the calendar year 2020.

The mean and median Enterprise Value to EBITDA trading multiples of the non-traditional and bulk terminals MLPs are set forth below. The table also includes relevant multiple ranges selected by Evercore based on the resulting range of Enterprise Value to EBITDA multiples and certain other considerations related to the specific characteristics of SXCP noted by Evercore.

 

Benchmark (Non-Traditional MLPs)

   Mean      Median  

Enterprise Value/2019 EBITDA

     8.5x        8.9x  

Enterprise Value/2020 EBITDA

     7.5x        7.5x  

Benchmark (Bulk Terminals MLPs)

   Mean      Median  

Enterprise Value/2019 EBITDA

     9.2x        9.2x  

Enterprise Value/2020 EBITDA

     8.0x        8.0x  

 

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Benchmark

   Reference Range – Non-
Traditional MLPs
   Reference Range –
Bulk Terminals
   Implied Enterprise Value
Range ($ in millions)
 

Enterprise Value/2019 EBITDA

   7.5x – 9.0x    8.0x – 10.0x    $ 1,677 - $2,040  

Enterprise Value/2020 EBITDA

   7.0x – 8.0x    7.5x – 8.5x    $ 1,629 - $1,857  

After adjusting for debt and cash as of January 1, 2019, and dividing by total units outstanding as of January 1, 2019, Evercore determined an implied equity value per SXCP Common Unit range of (i) $18.54 to $26.23 based on 2019 adjusted EBITDA and (ii) $17.52 to $22.34 based on 2020 adjusted EBITDA.

Analysis of SunCoke

Assumptions with Respect to SunCoke

Evercore performed a series of analyses to derive indicative valuation ranges for shares of the SunCoke Common Stock. Evercore performed its analyses utilizing the financial projections for SunCoke provided by management of SunCoke (the “SunCoke Financial Projections”). A summary of the SunCoke Financial Projections are available in “The Merger—Unaudited Financial Projections of SunCoke and SXCP” above. The SunCoke Financial Projections were not adjusted by Evercore.

Discounted Cash Flow Analysis

Evercore performed a discounted cash flow analysis of SunCoke to derive a range of implied value per share of SunCoke Common Stock utilizing the SunCoke Financial Projections based on: (i) a discounted cash flow analysis of SunCoke’s directly-held assets; (ii) the implied value of the SXCP Common Units owned by SunCoke based on the SXCP Discounted Cash Flow Analysis, excluding the adjustment to the SXCP Public Units for Remedial Allocations, and (iii) the value of SunCoke’s general partner interest in SXCP implied by the Precedent M&A Transaction Analysis for SunCoke, as described further below.

For the discounted cash flow analysis of SunCoke’s directly-held assets, Evercore calculated ranges of implied enterprise value of SunCoke’s directly-held assets utilizing a range of discount rates based on SunCoke’s WACC, as estimated by Evercore based on the CAPM and SunCoke’s steel-supplier and steel producer peers and Evercore’s professional judgment, and terminal values based on a range of estimated EBITDA exit multiples as well as perpetuity growth rates. Evercore assumed a range of discount rates of 11.0% to 13.0%, a range of EBITDA exit multiples of 5.5x to 7.5x and a range of perpetuity growth rates of 0.0% to 2.0%. Evercore then added the implied values of the SXCP Common Units owned by SunCoke, derived from the Discounted Cash Flow Analysis of SXCP, and the implied values of SunCoke’s general partner interest in SXCP, derived from the SunCoke Precedent M&A Transaction Analysis (described below), to the implied enterprise value ranges based on the discounted cash flow analysis of SunCoke’s directly-held assets to derive ranges of SunCoke’s total enterprise value. Evercore then added the SunCoke’s net cash as of January 1, 2019, and subtracted SunCoke’s liability for pneumoconiosis benefits as of January 1, 2019, as provided by management of SunCoke, to derive implied ranges of SunCoke’s equity value. Evercore then divided the ranges of implied equity values of SunCoke by the number of fully-diluted shares of SunCoke Common Stock outstanding as of January 1, 2019, to derive ranges of implied values per share of the SunCoke Common Stock. Evercore then subtracted the net present value of the projected cash tax expense resulting from Remedial Allocations utilizing a discount rate of 12.0% based on SunCoke’s WACC from the implied values per share of SunCoke Common Stock.

The Discounted Cash Flow analysis utilizing the EBITDA exit multiple methodology to calculate terminal value resulted in a range of implied equity value per share of SunCoke Common Stock of $12.64 to $18.27. The Discounted Cash Flow Analysis utilizing the perpetuity growth rate methodology to calculate terminal value resulted in a range of implied equity value per share of SunCoke Common Stock of $8.74 to $15.63.

 

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Precedent M&A Transaction Analysis

Evercore reviewed selected transactions that Evercore deemed to have certain characteristics similar to those of SunCoke, including transactions involving (i) fee-based raw materials processing assets; (ii) steel assets and (iii) general partner interests in MLPs.

Evercore reviewed transactions involving fee-based raw materials processing assets announced since April 2014 and selected eight transactions involving assets that Evercore deemed to have certain characteristics that are similar to those of SunCoke’s directly-held assets, although Evercore noted that none of the selected transactions or the selected companies or partnerships that participated in the selected transactions were directly comparable to SunCoke.

 

Date
Announced
  

Acquiror / Target

05/12/17   

Enviva Partners, LP / 50.4% of Enviva Port of Wilmington, LLC (Enviva Wilmington Holdings, LLC)

10/17/16   

Enviva Partners, LP / 100% of Enviva Pellets Sampson, LLC (Enviva Wilmington Holdings, LLC)

12/14/15   

Enviva Partners, LP / 100% of Southampton Plant (Enviva Holdings, LP)

07/21/15   

SunCoke Energy Partners, L.P. / 23.0% of Granite City Coke Facility (SunCoke Energy, Inc.)

05/22/15   

AS Graanul Invest / SIA Latgran (BillerudKorsnas)

01/12/15   

SunCoke Energy Partners, L.P. / 75.0% of Granite City Coke Facility (SunCoke Energy, Inc.)

09/30/14   

Enviva Partners, LP / Green Circle Energy Inc. (JCE Group Aktiebolag)

04/23/14   

SunCoke Energy Partners, L.P. / 33.0% of Haverhill and Middletown cokemaking facilities (SunCoke Energy, Inc.)

Evercore noted that the mean and median of the implied Enterprise Value to EBITDA multiples for the selected fee-based raw materials processing transactions were equal to 7.6x and 7.7x, respectively.

Evercore reviewed selected transactions involving steel assets announced since April 2002 and selected 23 transactions involving assets that Evercore deemed to have certain characteristics that are similar to those of SunCoke’s assets, although Evercore noted that none of the selected transactions or the selected companies that participated in the selected transactions were directly comparable to SunCoke.

 

Date
Announced

  

Acquiror

  

Target

03/01/18

   Senalior Investments (DCH)    DMZ (Evraz)

01/02/18

   Commercial Metals    TAMCO / Reinforcing Steel West (Gerdau)

02/21/17

   Ternium SA    ThyssenKrupp CSA

04/08/15

   Hyundai Steel    Hyundai Hysco

07/21/14

   AK Steel    Severstal Dearborn

02/03/11

   Nippon Steel    Sumitomo Metal

12/21/10

   JSW Steel    Ispat

03/21/08

   SeverStal    Sparrows Point

08/26/07

   US Steel    Stelco

04/15/07

   Essar    Algoma

03/17/07

   Votorantim    Acerias Paz del Rio

12/20/06

   Arcelor Mittal    Sicartsa

11/20/06

   Evraz Group    Oregon Steel

10/05/06

   Tata Steel    Corus Group

06/25/06

   Mittal    Arcelor

11/23/05

   Arcelor    Dofasco

 

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Date
Announced

  

Acquiror

  

Target

10/24/05

   Mittal Steel    Vat Kryvorizhstal

07/13/05

   Evraz Group    Vitkovice Steel

12/15/04

   SeverStal    Lucchini

10/25/04

   Ispat / Mittal    ISG

16/28/04

   Arcelor    Siderurgica de Tubarao

01/09/03

   US Steel    National Steel - Steel Assets

04/12/02

   ISG    LTV Steel

Evercore noted that the mean and median of the implied Enterprise Value to EBITDA multiples for the selected steel transactions were equal to 7.3x and 6.8x, respectively.

Based on Evercore’s review of selected fee-based raw materials processing transactions and selected steel transactions, Evercore determined a range of relevant Enterprise Value to EBITDA multiples of 6.5x to 7.5x and applied this range to 2018 adjusted EBITDA generated by SunCoke’s directly-held assets to derive an implied value range of SunCoke’s directly-held assets.

Evercore also reviewed publicly available information for selected transactions involving general partners of MLPs announced since January 2015 and selected seven transactions that Evercore deemed to have certain characteristics that are similar to those of SunCoke’s general partner interest in SXCP, although Evercore noted that none of the selected transactions or the selected companies or partnerships that participated in the selected transactions were directly comparable to SunCoke’s general partner interest in SXCP.

 

Date
Announced

  

Acquiror

  

Target

02/08/18

   NuStar Energy L.P.    NuStar GP Holdings, LLC

01/16/18

   Energy Transfer Partners, L.P.    USA Compression Partners GP LLC

12/15/17

   CNX Resources Corporation    50.0% Interest of CONE Gathering LLC

04/28/16

   Memorial Production Partners LP    Memorial Production Partners, GP

01/21/16

   Royal Energy Resources, Inc.    Rhino GP LLC

04/20/15

   Vanguard Natural Resources, LLC    LRE GP, LLC

01/15/15

   Azure Midstream Energy, LLC    Marlin Midstream Partners, L.P.

Based on its review of the selected transactions involving general partner interests and observed metrics and certain other considerations related to the specific characteristics of SunCoke and SXCP, Evercore selected a range of general partner value to general partner and IDR cash flow of 8.0x to 12.5x and a range of general partner value to underlying MLP equity market capitalization of 1.0% to 4.0%. Evercore then applied the selected ranges to SXCP’s general partner and IDR payments based upon the current quarterly SXCP distribution per SXCP Common Unit and to the SXCP equity market capitalization as of February 1, 2019, as applicable, to derive an implied value range for SunCoke’s general partner interest in SXCP.

Evercore calculated the implied value of the cash flow from SunCoke’s international licensing arrangement with a Brazilian cokemaking facility (the “Licensing Fee Value”), which terminates in 2023, by discounting such remaining cash flow at 12.0% based on SunCoke’s WACC.

Evercore calculated the total implied SunCoke Enterprise Value range based on the sum of (i) the implied values of SunCoke’s directly-held assets and general partner interest based on the Precedent M&A Transaction Analysis, (ii) the Licensing Fee Value and (iii) the value of the SXCP Common Units owned by SunCoke based on the value per SXCP Common Unit implied by the SXCP Precedent M&A Transaction Analysis. Evercore then added SunCoke’s net cash as of January 1, 2019, and subtracted SunCoke’s liability for pneumoconiosis benefits as of January 1, 2019, as provided by management of SunCoke, to derive implied ranges of SunCoke’s

 

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equity value. Evercore then divided the range of implied equity values of SunCoke by the number of fully-diluted shares of SunCoke Common Stock outstanding as of January 1, 2019, to derive a range of value per share of SunCoke Common Stock of $13.42 to $17.97.

Peer Group Trading Analysis

Evercore performed a peer group trading analysis of SunCoke by reviewing and comparing the market values and trading multiples of the following two steel suppliers that Evercore deemed to have certain characteristics that are similar to those of SunCoke:

 

   

Cleveland-Cliffs Inc.

 

   

Sims Metal Management Limited

Although the peer group was compared to SunCoke for purposes of this analysis, no company used in the peer group analysis is identical or directly comparable to SunCoke. In order to calculate peer group trading multiples, Evercore relied on publicly available filings with the SEC and equity research analyst estimates.

For each of the peer group companies, Evercore calculated the following trading multiples:

 

   

Enterprise Value/2019 EBITDA, which is defined as Enterprise Value divided by estimated adjusted EBITDA for the calendar year 2019; and

 

   

Enterprise Value/2020 EBITDA, which is defined as Enterprise Value divided by estimated adjusted EBITDA for the calendar year 2020.

The mean and median trading multiples are set forth below. The table also includes relevant multiple ranges selected by Evercore based on the resulting range of multiples and certain other considerations related to the specific characteristics of SunCoke noted by Evercore.

 

Benchmark

   Mean      Median  

Enterprise Value/2019 EBITDA

     5.9x        5.9x  

Enterprise Value/2020 EBITDA

     6.2x        6.2x  

 

Benchmark

   Reference Range  

Enterprise Value/2019 EBITDA

     5.0x – 7.0x  

Enterprise Value/2020 EBITDA

     5.0x – 8.0x  

Evercore calculated the total implied SunCoke Enterprise Value range based on the sum of (i) the implied values of its directly-held assets and general partner interest in SXCP implied by the Peer Group Trading Analysis, (ii) the Licensing Fee Value and (iii) the value of the SXCP Common Units owned by SunCoke based upon the value per SXCP Common Unit implied by the SXCP Peer Group Trading Analysis. Evercore then added SunCoke’s net cash as of January 1, 2019, and subtracted SunCoke’s liability for pneumoconiosis benefits as of January 1, 2019, as provided by management of SunCoke, to derive implied ranges of SunCoke’s equity value. Evercore then divided the ranges of implied equity values of SunCoke by the number of fully-diluted shares of SunCoke Common Stock outstanding as of January 1, 2019, to derive a range of value per share of SunCoke Common Stock of (i) $13.01 to $18.22 based on 2019 adjusted EBITDA and (ii) $14.32 to $20.09 based on 2020 adjusted EBITDA.

Exchange Ratio Summary

Evercore analyzed the exchange ratios implied by the ranges of value per SXCP Common Unit / share of SunCoke Common Stock based on each applicable valuation methodology. In analyzing the implied exchange

 

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ratios, and at the direction of SunCoke management, Evercore incorporated into the implied exchange ratios the net present value of the after-tax Projected Cost Savings and Synergies expected to result from the Merger, as applicable, including the elimination of Remedial Allocations, incremental tax depreciation expense resulting from the step-up in tax basis for the publicly-owned interest in SXCP’s assets and the elimination of public partnership expenses, each of which were provided by management of SunCoke.

The resulting implied exchange ratio reference ranges utilizing each applicable valuation methodology are summarized below.

 

Benchmark

   Reference Range  

Discounted Cash Flow Analysis—EBITDA Multiple

     1.43x—1.53x  

Discounted Cash Flow Analysis—Perpetuity Growth

     1.44x—1.55x  

Precedent M&A Transaction Analysis

     1.32x—1.45x  

Peer Group Trading Analysis – 2019 EBITDA

     1.44x—1.57x  

Peer Group Trading Analysis – 2020 EBITDA

     1.22x—1.39x  

The net present values of the after-tax Projected Cost Savings and Synergies were determined by discounting amounts at 12.0% based on SunCoke’s WACC. The high end of the implied exchange ratio reference ranges summarized above reflect upwards adjustments that resulted from incorporating the net present values of the after-tax Projected Cost Savings and Synergies, which are summarized below.

 

Benchmark

   Increase to High End
of Reference Range
 

Discounted Cash Flow Analysis—EBITDA Multiple

     0.10x  

Discounted Cash Flow Analysis—Perpetuity Growth

     0.12x  

Precedent M&A Transaction Analysis

     0.13x  

Peer Group Trading Analysis – 2019 EBITDA

     0.13x  

Peer Group Trading Analysis – 2020 EBITDA

     0.16x  

Evercore compared the results of the exchange ratio analysis to the Exchange Ratio, noting that the Exchange Ratio was within or below the exchange ratio ranges implied by each of the aforementioned analyses, with the exception of the Peer Group Trading Analysis based on 2020 EBITDA.

General

The foregoing summary of certain material financial analyses does not purport to be a complete description of the analyses or data presented by Evercore. In connection with the review of the transaction, Evercore performed a variety of financial and comparative analyses for purposes of rendering its opinion to the SunCoke Board. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary described above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Evercore’s opinion. In arriving at its fairness determination, Evercore considered the results of all the analyses and did not draw, in isolation, conclusions from or with regard to any one analysis or factor considered by it for purposes of its opinion. Rather, Evercore made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all the analyses. In addition, Evercore may have given various analyses and factors more or less weight than other analyses and factors, and may have deemed various assumptions more or less probable than other assumptions. As a result, the ranges of valuations resulting from any particular analysis or combination of analyses described above should not be taken to be the view of Evercore with respect to the Exchange Ratio. No

 

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company used in the above analyses as a comparison is directly comparable to SunCoke and no partnership used in the above analyses as a comparison is directly comparable to SXCP, and no precedent transaction used is directly comparable to the Merger. Furthermore, Evercore’s analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the acquisition, public trading or other values of the companies, partnerships or transactions used, including judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of SunCoke, SXCP and their advisors.

Evercore prepared these analyses solely for the information and benefit of the SunCoke Board and for the purpose of providing an opinion to the SunCoke Board as to whether the Exchange Ratio is fair, from a financial point of view, to SunCoke. These analyses do not purport to be appraisals or to necessarily reflect the prices at which the business or securities actually may be sold. Any estimates contained in these analyses are not necessarily indicative of actual future results, which may be significantly more or less favorable than those suggested by such estimates. Accordingly, estimates used in, and the results derived from, Evercore’s analyses are inherently subject to substantial uncertainty, and Evercore assumes no responsibility if future results are materially different from those forecasted in such estimates. The issuance of the opinion was approved by an opinion committee of Evercore.

Except as described above, the SunCoke Board imposed no other instruction or limitation on Evercore with respect to the investigations made or the procedures followed by Evercore in rendering its opinion. The terms and conditions of the Merger Agreement and the related terms and conditions of the transaction were determined through arm’s-length negotiations between the SunCoke Board and the SXCP Conflicts Committee. Evercore did not recommend any specific exchange ratio to the SunCoke Board or recommend that any specific exchange ratio constituted the only appropriate exchange ratio in the Merger. Evercore’s opinion was only one of many factors considered by the SunCoke Board in its evaluation of the Merger and should not be viewed as determinative of the views of the SunCoke Board with respect to the Merger or the Exchange Ratio.

Under the terms of Evercore’s engagement letter with SunCoke, SunCoke has agreed to pay Evercore a fee of $1,000,000 upon rendering its opinion and an advisory fee of $1,500,000 upon consummation of the Merger. Evercore also received a fee of $250,000 upon execution of its engagement letter with SunCoke. In addition, SunCoke has agreed to reimburse Evercore for its reasonable out-of-pocket expenses (including legal fees, expenses and disbursements) incurred in connection with its engagement and to indemnify Evercore and any of its members, officers, advisors, representatives, employees, agents, affiliates or controlling persons, if any, against certain liabilities and expenses arising out of its engagement, or to contribute to payments which any of such persons might be required to make with respect to such liabilities.

Prior to this engagement, Evercore and its affiliates provided financial advisory services to SunCoke and had received fees for the rendering of these services including the reimbursement of expenses. During the two-year period prior to the date hereof and except as described herein, no material relationship existed between Evercore and SunCoke or SXCP pursuant to which compensation was received by Evercore or its affiliates as a result of such a relationship.

Evercore and its affiliates engage in a wide range of activities for their own accounts and the accounts of customers. In connection with these businesses or otherwise, Evercore and its affiliates and/or their respective employees, as well as investment funds in which any of them may have a financial interest, may at any time, directly or indirectly, hold long or short positions and may trade or otherwise effect transactions for their own accounts or the accounts of customers, in debt or equity securities, senior loans and/or derivative products relating to SunCoke or SXCP and their respective affiliates.

Interests of Certain Persons in the Merger Transactions

In considering the recommendations of the SunCoke Board, SunCoke Stockholders should be aware that the executive officers and directors of SunCoke have interests in the Merger Transactions that may differ from, or

 

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may be in addition to, the interests of SunCoke Stockholders generally. These interests may present such executive officers and directors with actual or potential conflicts of interests, and these interests, to the extent material, are described in this section. The SunCoke Board was aware of these interests and considered them, among other matters, prior to providing its approval and recommendation with respect to the Merger Agreement and the transactions contemplated thereby.

In considering the recommendations of the SXCP Conflicts Committee and the SXCP Board, SXCP Common Unitholders should be aware that the executive officers and directors of the SXCP General Partner have interests in the Merger Transactions that may differ from, or may be in addition to, the interests of SXCP Common Unitholders generally. These interests may present such executive officers and directors with actual or potential conflicts of interests, and these interests, to the extent material, are described in this section. The SXCP Conflicts Committee and the SXCP Board were aware of these interests and considered them, among other matters, prior to providing their respective approvals and recommendations with respect to the Merger Agreement and the transactions contemplated thereby.

Common Directors and Executive Officers

All of the executive officers (Michael G. Rippey, Fay West, P. Michael Hardesty, Katherine T. Gates and Gary P. Yeaw) of the SXCP General Partner are also executive officers of SunCoke, and two of the directors (Michael G. Rippey and Alvin Bledsoe) of the SXCP General Partner are also directors of the SunCoke Board. The following table lists each individual who holds a position as a director or executive officer (as applicable) of both the SXCP General Partner and SunCoke. Each of these individuals is expected to retain his or her position with SunCoke following the completion of the Merger.

 

Individual   

SXCP
General Partner Position

  

SunCoke Position

Michael G. Rippey    Chairman, President and Chief Executive Officer and Director    President, Chief Executive Officer and Director
Fay West    Senior Vice President, Chief Financial Officer and Director   

Senior Vice President and Chief Financial

Officer

P. Michael Hardesty    Senior Vice President, Commercial Operations, Business Development, Terminals, and International Coke and Director    Senior Vice President Commercial Operations, Business Development, Terminals and International Coke
Katherine T. Gates    Senior Vice President, General Counsel and Chief Compliance Officer and Director    Senior Vice President, General Counsel and Chief Compliance Officer
Gary P. Yeaw    Senior Vice President, Human Resources    Senior Vice President, Human Resources

Indemnification and Insurance

Subject to certain terms and conditions specified in the Merger Agreement, SunCoke has agreed to, for a period of six years after the effective time of the Merger, to the fullest extent permitted by applicable laws:

 

   

indemnify and hold harmless against any reasonable costs or expenses, judgments, fines, losses, claims, damages or liabilities, penalties and amounts paid in settlement in connection with any actual or threatened proceeding arising from acts or omissions occurring at or prior to the effective time of the Merger and provide advancement of expenses to certain past and present directors and officers of each of the SXCP General Partner, SXCP and SXCP’s subsidiaries and any person who is or was serving as an officer, director, member, partner, agent fiduciary or trustee of another person at the request of the SXCP General Partner, SXCP or SXCP’s subsidiaries (the “SXCP D&O Indemnified Parties”) with respect to each of the foregoing;

 

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honor all rights to indemnification, advancement of expenses, elimination of liability and exculpation from liabilities for acts or omissions occurring at or prior to the effective time of the Merger (including the transactions contemplated by the Merger Agreement) existing as of the date of the Merger Agreement in favor of the SXCP D&O Indemnified Parties;

 

   

ensure that the governing documents of SXCP and the SXCP General Partner (or their successor entities) contain provisions substantially no less advantageous with respect to indemnification, advancement of expenses, elimination of liability and exculpation of such entities’ present and former directors, officers, employees and agents than are set forth in the governing documents of SXCP and SXCP General Partner as of the date of the Merger Agreement; and

 

   

maintain officers’ and directors’ liability insurance with a nationally reputable carrier covering each SXCP D&O Indemnified Party who is or at any time prior to the effective time of the Merger was covered by the existing officers’ and directors’ liability insurance applicable to each of the SXCP General Partner, SXCP and SXCP’s subsidiaries on terms substantially no less advantageous to the SXCP D&O Indemnified Parties, as applicable, than such existing insurance with respect to acts or omissions, or alleged acts or omissions, prior to the effective time of the Merger.

These provisions are in addition to any other rights that certain of the directors and officers of each of the SXCP General Partner, SXCP and SXCP’s subsidiaries may have under the organizational documents of each of the SXCP General Partner, SXCP and SXCP’s subsidiaries or under applicable law.

Directors and Executive Officers of SunCoke after the Merger

The directors and executive officers of SunCoke prior to the completion of the Merger are expected to continue as directors and executive officers of SunCoke after the completion of the Merger.

Unit and Share Ownership of Directors and Executive Officers

All of the executive officers and certain of the directors of SunCoke beneficially own SXCP Common Units, and these executive officers and directors will receive the Merger Consideration upon completion of the Merger for each SXCP Common Unit that he or she holds. Please see the section titled “— Security Ownership of Executive Officers and Directors of SunCoke and the SXCP General Partner” below for further detail.

In addition, certain directors of SXCP General Partner have deferred compensation accounts pursuant to the SunCoke Energy Partners, L.P. Directors’ Deferred Compensation Plan (the “Deferred Compensation Plan”). These deferred compensation accounts represent rights to future cash distributions on separation from service, but pending distribution the amounts deferred are deemed invested in SXCP Common Units. Upon completion of the Merger, each deemed investment in an SXCP Common Unit will be converted into a deemed investment in the Merger Consideration. Pursuant to the Deferred Compensation Plan, deferred compensation accounts will continue to be distributed to the participating director in cash upon his or her separation from service.

No Severance Payments

No executive officer or director of SunCoke or the SXCP General Partner is entitled to or will receive any severance payments in connection with the Merger.

Executive Compensation

SXCP does not directly employ any of the individuals responsible for managing or operating its business. None of the individuals who have served as a director or executive officer at the SXCP General Partner or SunCoke since the beginning of 2018 have any agreements or understandings with SunCoke, SXCP General Partner, SXCP or any other party with respect to any type of compensation (whether present, deferred or contingent) that is based

 

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on or otherwise relates to the Merger and is reportable under Item 402(t) of Regulation S-K under the Securities Act, and thus no advisory vote pursuant to Rule 14a-21(c) of the Exchange Act is required to be included in the SunCoke proxy in connection with this joint prospectus/consent statement/proxy statement.

Security Ownership of Executive Officers and Directors of SunCoke and the SXCP General Partner

Some of the directors and executive officers of the SXCP General Partner beneficially own SXCP Common Units and will receive the applicable Merger Consideration upon the effective time of the Merger. In addition, some of the directors and executive officers of SunCoke beneficially own SXCP Common Units and will receive the applicable Merger Consideration upon the effective time of the Merger. The following table sets forth the beneficial ownership of each of the directors and named executive officers of SunCoke and the SXCP General Partner, and of all of the directors and executive officers of SunCoke and the SXCP General Partner as a group, of (i) SXCP Common Units prior to the effective time of the Merger, (ii) shares of SunCoke Common Stock prior to the effective time of the Merger and (iii) shares of SunCoke Common Stock after giving effect to the Merger, in each case as of March 7, 2019.

 

Name of Beneficial Owner

   SXCP
Common
Units (1)
     Percentage
of SXCP
Common
Units
Outstanding
     Shares of
SunCoke
Common
Stock
prior to
the
Merger (1)
     Percentage
of shares of
SunCoke
Common
Stock
Outstanding
 

Michael G. Rippey

     —          —          24,288        —    

Fay West

     —          —          296,069        *  

Katherine T. Gates

     —          —          87,571        *  

P. Michael Hardesty(2)

     6,031        *        235,120        *  

Gary P. Yeaw

     2,500        *        192,135        *  

Allison S. Lausas

     300        *        23,449        *  

John W. Rowe

     —          —          5,000        *  

Alvin Bledsoe(3)(4)

     1,000        *        5,934        *  

Peter B. Hamilton

     —          —          73,451        *  

Susan R. Landahl

     —          —          —          —    

Robert A. Peiser

     —          —          33,951        *  

James E. Sweetnam

     16,100        *        —          —    

Martha Z. Carnes(4)(5)

     1,668        *        —          —    

John W. Somerhalder, II(4)(5)

     —          —          —          —    

All directors and executive officers of SunCoke and the SXCP General Partner as a group (14 persons)

     27,599        *        976,968        1.50

 

*

Less than one percent.

(1)

The amounts shown in this column includes shares of SunCoke Common Stock which the persons listed have the right to acquire as a result of the vesting and exercise of stock options, conversion of restricted share units, and/or settlement of performance share units at 100% of target, within 60 days after March 7, 2019 under certain plans, including the SunCoke Energy, Inc. Long-Term Performance Enhancement Plan.

(2)

Mr. Hardesty also holds 9,981 units, valued at $4.61/unit, in the SunCoke 401(k) Plan, and 8,949 units, valued at $4.90/unit, in the SunCoke Energy, Inc. Savings Restoration Plan. Equivalent share ownership represented by these units was derived, in each case, by multiplying the number of units held by the current value per unit, and then dividing by $9.00/common share (NYSE closing price on March 7, 2019). Thus, Mr. Hardesty’s participation in these funds represents an aggregate share equivalent position of approximately 1,109 shares of SunCoke. This position is not reflected in the data shown in the foregoing table.

(3)

Mr. Bledsoe has elected to defer a portion of his compensation from SunCoke in the form of Share Units under the SunCoke Energy, Inc. Directors’ Deferred Compensation Plan. Mr. Bledsoe currently holds 67,906.49 Share Units.

 

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  These Share Units are not reflected in the data shown in the foregoing table. Each Share Unit is treated as if it were invested in SunCoke common stock, and dividend equivalents (if any) are credited in the form of additional Share Units. These Share Units do not have voting rights. Such Share Units ultimately will be settled in cash (based upon a ten-day average closing price for trading of SunCoke common stock on the NYSE prior to payment) following termination of Mr. Bledsoe’s service on SunCoke’s Board of Directors. A description of the SunCoke Energy, Inc. Directors’ Deferred Compensation Plan will be included in the proxy statement for SunCoke’s 2019 annual meeting of stockholders which will be available upon its filing on the SEC’s website at www.sec.gov and on SunCoke’s website at www.suncoke.com at the “Investors—Financial Reports—Annual Report & Proxy” tab. SunCoke’s 2019 Proxy Statement also will be available free of charge from the Corporate Secretary of the SXCP General Partner.
(4)

Certain directors have elected to defer all or a portion of their compensation into phantom unit credits under the SunCoke Energy Partners, L.P. Directors’ Deferred Compensation Plan. Each phantom unit credit is treated as if it were invested in common units representing limited partnership interests in SXCP, and distribution equivalents are credited in the form of additional phantom unit credits. These phantom unit credits do not have voting rights. Such phantom unit credits ultimately will be settled in cash following termination of the director’s service on the SXCP Board, based upon the average closing price for our common units for the ten trading days on the NYSE immediately prior to the payment date. The following directors hold such phantom unit credits: Mr. Bledsoe: 6,188.31 phantom unit credits; Ms. Carnes: 5,847.96 phantom unit credits and Mr. Somerhalder: 16,723.64 phantom unit credits.

(5)

Consistent with the SXCP Partnership Agreement, Ms. Carnes and Mr. Somerhalder, as independent directors otherwise unaffiliated with SXCP General Partner, or SunCoke, are expected not to maintain any ownership interest in SunCoke Common Stock.

No Appraisal Rights

Neither the SXCP Common Unitholders nor the SunCoke Stockholders have appraisal rights in connection with the Merger under applicable law or contractual appraisal rights under the SXCP Partnership Agreement, the amended and restated certificate of incorporation of SunCoke (the “SunCoke Certificate”), the amended and restated bylaws of SunCoke (the “SunCoke Bylaws,” and together with the SunCoke Certificate, the “SunCoke Organizational Documents”), or the Merger Agreement.

Regulatory Matters

In connection with the Merger, SunCoke and SXCP each intend to make all required filings under the Securities Act and the Exchange Act, as well as any required filings or applications with the NYSE. SunCoke and SXCP are unaware of any other requirement for the filing of information with, or the obtaining of the approval of, governmental authorities in any jurisdiction that is applicable to the Merger.

Because the Merger is not reportable under the HSR Act, no filings with respect to the Merger were required with the FTC or the DOJ.

Listing of the SunCoke Common Stock to be Issued in the Merger

SunCoke expects to obtain approval to list its SunCoke Common Stock to be issued pursuant to the Merger Agreement on the NYSE, which approval is a condition to the Closing.

 

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Accounting Treatment

The Merger will be accounted for in accordance with Financial Accounting Standards Board Accounting Standards Codification (ASC) 810, Consolidation—Overall—Changes in a Parent’s Ownership Interest in a Subsidiary (ASC 810). Because SunCoke controls SXCP both before and after the Merger, the changes in SunCoke’s ownership interest in SXCP will be accounted for as an equity transaction. SunCoke’s costs will be recognized as an adjustment to additional paid-in capital, net of estimated tax benefit, upon exchange of securities at Closing, consistent with SunCoke’s historical accounting policy election. Transaction costs incurred by SXCP will be expensed in the consolidated statement of income as incurred. In addition, the tax effect of the Merger will be presented in additional paid-in capital consistent with ASC 740, Income Taxes (ASC 740). Since the SunCoke historical financial information includes the accounts of SXCP, the historical financial information of SXCP has not been shown separately. SunCoke will apply its historical accounting policies and recognize the assets and liabilities of SXCP at their respective historical values as of the closing date of the Merger.

 

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THE MERGER AGREEMENT

The following is a summary of the material terms of the Merger Agreement. This summary is qualified in its entirety by reference to the Merger Agreement, a copy of which is attached to this joint prospectus/consent statement/proxy statement as Annex A and is incorporated into this joint prospectus/consent statement/proxy statement by reference. You should read the Merger Agreement because it, and not this joint prospectus/consent statement/proxy statement, is the legal document that governs the terms of the Merger.

Explanatory Note Regarding the Merger Agreement and the Summary of the Merger Agreement: Representations, Warranties, and Covenants in the Merger Agreement Are Not Intended to Function or Be Relied on as Public Disclosures.

The Merger Agreement and the summary of its terms in this joint prospectus/consent statement/proxy statement have been included to provide information about the terms and conditions of the Merger Agreement. The representations, warranties and covenants contained in the Merger Agreement were made by the parties thereto only for the purposes of the Merger Agreement and were qualified and subject to certain limitations and exceptions agreed to by the parties thereto in connection with negotiating the terms of the Merger Agreement. In particular, in your review of the representations and warranties contained in the Merger Agreement and described in this summary, it is important to bear in mind that the representations and warranties were negotiated for the purpose of allocating contractual risk among the parties to the Merger Agreement rather than to establish matters as facts. The representations and warranties may also be subject to a contractual standard of materiality or material adverse effect different from those generally applicable to unitholders and stockholders and reports and documents filed with the SEC and in some cases may be qualified by disclosures made by one party to the other, which are not necessarily reflected in the Merger Agreement. Moreover, information concerning the subject matter of the representations and warranties, which do not purport to be accurate as of the date of this joint prospectus/consent statement/proxy statement, may have changed since the date of the Merger Agreement, and subsequent developments or new information qualifying a representation or warranty may have been included in or incorporated by reference into this joint prospectus/consent statement/proxy statement.

For the foregoing reasons, the representations, warranties and covenants, including any descriptions of those provisions, should not be read alone. Instead, such provisions or descriptions should be read only in conjunction with the other information provided elsewhere in this joint prospectus/consent statement/proxy statement or incorporated by reference into this joint prospectus/consent statement/proxy statement.

SunCoke and SXCP will provide additional disclosure in their public reports to the extent they become aware of the existence of any material facts that are required to be disclosed under federal securities law and that might otherwise contradict the representations and warranties contained in the Merger Agreement and will update such disclosure as required by the federal securities laws.

Structure of the Merger

Pursuant to the terms of the Merger Agreement, at the effective time of the Merger, Merger Sub will merge with and into SXCP, with SXCP being the surviving entity in the Merger as an indirect wholly owned subsidiary of SunCoke.

When the Merger Becomes Effective

Concurrently with or as soon as practicable following the Closing, SunCoke and SXCP will cause a duly executed certificate of merger effecting the Merger to be filed with the Secretary of State of the State of Delaware. The Merger will become effective at the time and on the date on which the certificate of merger is filed or, if agreed to by the parties, such later time and date as may be expressed in the certificate of merger. This time is referred to as the “effective time of the Merger.”

 

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Effect of the Merger

At the effective time of the Merger:

 

   

Each SXCP Public Unit outstanding immediately prior to the effective time of the Merger will be converted into the right to receive the Merger Consideration.

 

   

Each SXCP Public Unit, upon being converted into the right to receive the Merger Consideration, will cease to be outstanding and will be canceled and retired and will cease to exist and each holder of such SXCP Public Unit immediately prior to the effective time of the Merger will thereafter cease to be a limited partner of SXCP or have any rights with respect to any such SXCP Public Units except the right to receive the Merger Consideration and any dividends and other distributions described in the Merger Agreement.

 

   

All SXCP general partner interests, IDRs in SXCP, and SXCP Common Units that are not SXCP Public Units will, in each case, remain outstanding as partnership interests in the surviving entity, unaffected by the Merger.

 

   

The limited liability company interests in Merger Sub issued and outstanding immediately prior to the effective time of the Merger will be converted into the right to receive an aggregate number of common units of the surviving entity equal to the number of SXCP Public Units that are converted into the right to receive the Merger Consideration pursuant to the Merger.

If, before the effective time of the Merger, the number of outstanding SXCP Common Units or shares of SunCoke Common Stock will be changed into a different number of units, shares or other securities, by reason of any dividend or distribution payable in partnership interests, voting securities, equity interests or rights, subdivision, reclassification, split, split-up, combination, merger, consolidation, reorganization, exchange or other similar transaction, then the Merger Consideration, and any other similarly dependent items will be appropriately adjusted to reflect fully the effect of such transaction and to provide SXCP, Merger Sub and SXCP Public Units the same economic effect as contemplated by the Merger Agreement prior to such event.

For a description of the SXCP Common Units and the SunCoke Common Stock and a description of the comparative rights of SXCP Common Unitholders and SunCoke Stockholders, please read “Comparison of the Rights of SunCoke Stockholders and SXCP Common Unitholders” and “Description of SunCoke Common Stock.”

Exchange of Units; Fractional Share Proceeds

Exchange Agent

SunCoke has appointed Computershare Trust Company, N.A. (the “Exchange Agent”) to act as exchange agent for the payment of the Merger Consideration, any dividends and other distributions required to be paid pursuant to the Merger Agreement and any Fractional Share Proceeds (as defined and described below). At or prior to the closing of the Merger, SunCoke will (i) deposit (or cause to be deposited) with the Exchange Agent, for the benefit of the holders of SXCP Public Units, an amount of cash sufficient to pay the Fractional Share Proceeds (the “Exchange Fund”), (ii) reserve with the Exchange Agent the shares of SunCoke Common Stock to be issued pursuant to the Merger Agreement and (iii) authorize the Exchange Agent to exchange shares of SunCoke Common Stock as described above under “— Effect of the Merger.” SunCoke will deposit with the Exchange Agent any additional cash or other consideration as applicable in excess of the Exchange Fund as and when necessary to pay any dividends and other distributions and other amounts required to be paid pursuant to the Merger Agreement. SunCoke will pay all costs and fees of the Exchange Agent and all expenses associated with the exchange process.

After the effective time of the Merger, there will be no further transfers on the records of SXCP or its transfer agent of SXCP Public Units. If SXCP Public Units are presented to SXCP or its transfer agent for transfer after the effective time of the Merger, they will be canceled against delivery of the SunCoke Common Stock and any proceeds resulting from the sale of fractional SunCoke Common Stock and unpaid distributions.

 

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Exchange of Units; Fractional Share Proceeds

If you are a SXCP Public Unitholder whose SXCP Public Units are converted into the right to receive the Merger Consideration as of the effective time of the Merger, SunCoke will, or will cause the Exchange Agent to, mail to you a form of letter of transmittal and instructions for effecting your surrender of SXCP Common Unit certificates or Book-Entry SXCP Common Units in exchange for, as applicable, whole shares of SunCoke Common Stock, any dividends and other distributions required to be paid pursuant to the Merger Agreement and any Fractional Share Proceeds.

Each registered holder of SXCP Public Units exchanged pursuant to the Merger who would otherwise have been entitled to receive a fractional share of SunCoke Common Stock (after taking into account all SXCP Public Units held by such holder immediately prior to the effective time of the Merger) will receive, from the Exchange Agent, a cash payment, without interest, in lieu of such fractional shares representing such holder’s proportionate interest, in the proceeds from the sale by the Exchange Agent (the “Share Proceeds”) of the aggregate number of fractional shares of SunCoke Common Stock that registered holders of SXCP Public Unitholders converted pursuant to the Merger would have otherwise been entitled to receive (such Share Proceeds held in trust for the benefit of the holders of SXCP Public Units by the Exchange Agent until such Share Proceeds are distributed to such holders of SXCP Public Units, the “Fractional Share Proceeds”).

SXCP Public Unitholders who deliver a properly completed and duly executed letter of transmittal and any such other documents as may reasonably be required by the Exchange Agent, together with their SXCP Common Unit certificates (if any) or Book-Entry SXCP Common Units, will be entitled to receive (i) that number of whole shares of SunCoke Common Stock to which such holder is entitled in accordance with the Merger Agreement as described above under “— Effect of the Merger,” (ii) the Fractional Share Proceeds, if any, payable in lieu of any fractional shares of SunCoke Common Stock otherwise issuable, and (iii) any dividends or distributions required to be paid pursuant to the Merger Agreement.

Conditions to the Merger

The obligation of the parties to the Merger Agreement to complete the Merger is subject to the satisfaction or waiver of certain conditions, including, among others:

 

   

the approval and adoption of the Merger Agreement and the transactions contemplated thereby, including the Merger, by holders of at least a majority of the outstanding SXCP Common Units;

 

   

the absence of legal injunctions prohibiting the transactions contemplated by the Merger Agreement;

 

   

the effectiveness of a Registration Statement on Form S-4 with respect to the Parent Stock Issuance;

 

   

the approval of the listing on the NYSE, subject to official notice of issuance, of the SunCoke Common Stock to be issued in the Merger;

 

   

the affirmative vote of the holders of a majority of the votes cast at the SunCoke Special Meeting or any adjournment or postponement thereof to approve the Parent Stock Issuance;

 

   

the receipt of all governmental consents and approvals, the absence of which would, individually or in the aggregate, have a material adverse effect on either SunCoke or SXCP; and

 

   

the clearing of this joint prospectus/consent statement/proxy statement by the SEC and the mailing of such to holders of SunCoke Common Stock and SXCP Common Units.

The parties’ obligations are also separately subject to the satisfaction or waiver of the following conditions:

 

   

certain fundamental representations and warranties of the other party relating to organization and existence, authorization to execute and deliver the Merger Agreement and to consummate the transactions contemplated thereby and, in the case of SunCoke only, capitalization of SunCoke shall be true and correct in all material respects as of the Closing;

 

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the representations and warranties of the other party relating to the absence of an occurrence or event which has had a material adverse effect on such party shall be true and correct as of the Closing;

 

   

all agreements and covenants required to be performed by the other party that have materiality, “Parent Material Adverse Effect,” “SXCP Material Adverse Effect” or similar qualifiers shall have been performed or complied with, and all other agreements and covenants required to be performed by the other party that are not so qualified shall have been performed or complied with in all material respects; and

 

   

the other party has delivered a certificate of an executive officer of such party certifying that the preceding conditions have been satisfied.

Representations and Warranties

The Merger Agreement contains representations and warranties by each of the parties to the Merger Agreement, several of which provide that the representation and warranty does not extend to matters where the failure of the representation and warranty to be accurate would not result in a material adverse effect on the party making the representation and warranty. These representations and warranties are qualified by reference to (i) the disclosure letters corresponding to the Merger Agreement and (ii) filings made by each of SunCoke and SXCP.

The representations and warranties made by SXCP concern, among other things:

 

   

organization and existence;

 

   

authorization and approval to execute and deliver the Merger Agreement and to consummate the transactions contemplated thereby;

 

   

absence of contraventions, violations, conflicts or liens not entered into in the ordinary course of business and other conflicts caused by the execution, performance and delivery of the Merger Agreement;

 

   

receipt of any applicable consents, approvals, licenses, permits, orders or authorizations of, or any filing with or notice to, any governmental entity;

 

   

absence of changes that would have a material adverse effect;

 

   

receipt of a financial advisor opinion; and

 

   

accuracy of information supplied in writing by or on behalf of the SXCP Conflicts Committee specifically for inclusion or incorporation by reference in the registration statement of which this joint prospectus/consent statement/proxy statement forms a part.

The representations and warranties made by SunCoke concern, among other things:

 

   

organization and existence;

 

   

authorization and approval to execute and deliver the Merger Agreement and to consummate the transactions contemplated thereby;

 

   

absence of contraventions, violations, conflicts or liens not entered into in the ordinary course of business and other conflicts caused by the execution, performance and delivery of the Merger Agreement;

 

   

receipt of any applicable consents, approvals, licenses, permits, orders or authorizations of, or any filing with or notice to, any governmental entity;

 

   

capitalization and ownership of capital stock;

 

   

reports filed with the SEC and internal controls;

 

   

accuracy of financial statements and absence of undisclosed liabilities;

 

   

title to real properties, rights-of-way, zoning and condemnation;

 

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absence of litigation and violation of laws;

 

   

absence of changes that would have a material adverse effect;

 

   

tax matters;

 

   

absence of violations or liabilities under environmental laws;

 

   

compliance with applicable licenses and permits;

 

   

material contracts and agreements;

 

   

employees and employee benefits;

 

   

labor matters;

 

   

insurance matters;

 

   

condition of assets;

 

   

Investment Company Act of 1940, as amended (the “Investment Company Act”), compliance;

 

   

brokerage arrangements;

 

   

inapplicability of state takeover laws and takeover provision in the SunCoke Organizational Documents;

 

   

receipt of a financial advisor opinion; and

 

   

accuracy of information in the registration statement of which this joint prospectus/consent statement/proxy statement forms a part (including information regarding SXCP).

For purposes of the Merger Agreement:

 

   

a “Parent Material Adverse Effect” means any change, effect, event or occurrence that, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect on or a material adverse change in (i) the business, assets, liabilities, properties, condition (financial or otherwise), results of operations or prospects of SunCoke, Merger Sub and the partially or wholly owned and controlled, directly or indirectly, subsidiaries of SunCoke (excluding SXCP, SXCP General Partner and any partially or wholly owned and controlled, directly or indirectly, subsidiaries of SXCP), taken as a whole; provided, however, that any adverse changes, effects, events or occurrences resulting from or due to any of the following are disregarded in determining whether there has been a Parent Material Adverse Effect: (a) changes, effects, events or occurrences affecting the coke industry or the bulk terminaling industry generally (including any change in the prices of coal, steel or natural gas, any changes in industry margins or any regulatory changes or changes in applicable laws), (b) changes, effects, events or occurrences affecting the United States or global economic conditions or financial, credit, debt, securities or other capital markets in general, (c) any outbreak of, acts of or escalation of hostilities, terrorism, war or other similar national emergency, (d) the announcement or pendency of the Merger Agreement or the transactions contemplated thereby, (e) changes in any laws applicable to SunCoke or any of its subsidiaries or in accounting regulations or principles or the interpretation thereof that materially affects the Merger Agreement or the transactions contemplated thereby, (f) the SunCoke Parties taking any action required or contemplated by the Merger Agreement, (g) changes, effects, events or occurrences at any SXCP Group Entity (as defined in the Merger Agreement) or (h) any change in the market price or trading volume of the shares of common stock or other equity securities of SunCoke; provided further that, in the case of clauses (a), (b), (c) and (e) the adverse impact on the Parent Group Entities (as defined in the Merger Agreement), taken as a whole, is not materially disproportionate to the adverse impact on similarly situated parties, or (ii) the ability of any of the Parent Parties to perform their obligations under the Merger Agreement or to consummate the transactions contemplated by the Merger Agreement; and

 

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an “SXCP Material Adverse Effect” means any change, effect, event or occurrence that, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect on or a material adverse change in (i) the business, assets, liabilities, properties, condition (financial or otherwise), results of operations or prospects of SXCP and any partially or wholly owned and controlled, directly or indirectly, subsidiaries of SXCP, taken as whole; provided, however, that any adverse changes, effects, events or occurrences resulting from or due to any of the following shall be disregarded in determining whether there has been an SXCP Material Adverse Effect: (a) changes, effects, events or occurrences affecting the coke industry generally or the bulk terminaling industry generally (including any change in the prices of coal, steel or natural gas, any changes in industry margins or any regulatory changes or changes in applicable laws), (b) changes, effects, events or occurrences affecting the United States or global economic conditions or financial, credit, debit, securities or other capital markets in general, (c) any outbreak of, acts of or escalation of hostilities, terrorism, war or other similar national emergency, (d) the announcement or pendency of the Merger Agreement or the transactions contemplated thereby, (e) changes in any laws applicable to SXCP or any of its subsidiaries or in accounting regulations or principles or the interpretation thereof that materially affects the Merger Agreement or the transactions contemplated thereby, (f) the SXCP Parties taking any action required or contemplated by the Merger Agreement or (g) any change in the market price or trading volume of the limited partner interests or other equity securities of SXCP; provided further that, in the case of clauses (a), (b), (c) and (e) the adverse impact on the SXCP Group Entities (as defined in the Merger Agreement), taken as a whole, is not materially disproportionate to the adverse impact on similarly situated parties, or (ii) the ability of either of the SXCP Parties to perform their obligations under the Merger Agreement or to consummate the transactions contemplated by the Merger Agreement.

Covenants and Other Agreements

Prior to the Closing, the parties have agreed that neither SXCP nor SunCoke shall take any action prohibited by the Merger Agreement or fail to take any action required by the Merger Agreement that, in either case, would be reasonably likely to materially delay the consummation of the Merger or result in the failure of a condition to the Closing. Each of SXCP and SunCoke has also agreed to promptly notify the other party in writing of (i) any event, condition, or circumstance that could reasonably be expected to result in any of the conditions to the Closing not being satisfied at the effective time of the Merger and (ii) any material breach by the notifying party of any covenant, obligation, or agreement contained in the Merger Agreement. In addition, SunCoke has agreed to provide reasonable access to information with respect to SunCoke to the representatives and advisors of the SXCP Conflicts Committee.

Prior to the Closing and except (i) as provided in the Merger Agreement, (ii) as required by applicable laws, or (iii) as consented to in writing by the SXCP Conflicts Committee (which consent may not be unreasonably withheld, delayed, or conditioned), SunCoke has generally agreed not to take any action to cause (and has agreed not to permit SXCP General Partner to cause) the amendment of the SXCP Partnership Agreement or the limited liability company agreement of SXCP General Partner, as amended, supplemented or restated, in each case, to the extent that any such change or amendment would reasonably be expected to (x) prohibit, prevent or materially hinder, impede, or delay the ability of the parties to satisfy any conditions to or the consummation of the Merger or the other transactions contemplated by the Merger Agreement or (y) adversely impact the holders of SXCP Public Units in any material respect.

Except (i) as provided in the Merger Agreement, (ii) as required by applicable laws, (iii) as provided in any material contract to SunCoke, or (iii) as consented to in writing by the SXCP Conflicts Committee (which consent may not be unreasonably withheld, delayed, or conditioned), SunCoke has generally further agreed not to (and not to permit any of Merger Sub or the partially or wholly owned and controlled, directly or indirectly, subsidiaries of SunCoke (excluding SXCP, SXCP General Partner and any partially or wholly owned and controlled, directly or indirectly, subsidiaries of SXCP) to):

 

   

amend the SunCoke Organizational Documents in any manner that would reasonably be expected to (i) prohibit, prevent or materially hinder, impede, or delay the ability of the parties to satisfy any conditions to or the consummation of the Merger or the other transactions contemplated by the Merger Agreement or

 

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(ii) have an adverse effect on the value of the Merger Consideration to be received by the holders of SXCP Public Units in the Merger;

 

   

declare, set aside or pay any dividend or distribution payable in cash, stock or property in respect of any capital stock, other than regular quarterly cash dividends or distributions that have a record date after the effective time of the Merger;

 

   

other than transactions exclusively between wholly owned subsidiaries of SunCoke, adopt a plan or agreement of complete or partial liquidation, dissolution, restructuring, recapitalization, merger, consolidation, or other reorganization or business combination agreement, in each case, that would reasonably be expected to (i) prohibit, prevent or materially hinder, impede or delay the ability of the parties to satisfy any of the conditions to or the consummation of, the Merger or the other transactions contemplated by the Merger Agreement or (ii) have an adverse effect on the value of the Merger Consideration to be received by the holders of SXCP Public Units in the Merger;

 

   

issue, deliver or sell any equity securities or rights to acquire equity securities, of SunCoke, except for an issuance, delivery or sale (x) for cash in an amount not exceeding $40,000,000 in the aggregate (based on the market price of the securities at the time of issuance), (y) in connection with an acquisition in an amount not exceeding $10,000,000 in the aggregate (based on the market price of the securities at the time of issuance) or (z) in connection with the at-the-market offerings by SunCoke pursuant to an equity distribution program, other than as expressly permitted under the terms of the Merger Agreement;

 

   

grant any awards consisting of shares of SunCoke Common Stock or other equity interests of SunCoke under any equity-based, bonus, incentive, performance or other compensation plan or arrangement or employee benefit plan, other than in the ordinary course of business consistent with past practice, as retention incentives, or the payment of bonuses in the form of equity-based awards;

 

   

settle any claims, demands, lawsuits, or proceedings seeking damages or an injunction or other equitable relief where such settlements would, in the aggregate, have a material adverse effect (as described above) on SunCoke; or

 

   

except with respect to a SunCoke Acquisition Proposal or SunCoke Designated Proposal, agree, in writing or otherwise, to take any of the foregoing actions, or take any action or agree, in writing or otherwise, to take any action, including proposing or undertaking any merger, consolidation, acquisition or disposition, in each case, that would reasonably be expected to prohibit, prevent or materially hinder, impede or delay the ability of the parties to satisfy any of the conditions to or the consummation of the Merger or the other transactions contemplated by the Merger Agreement.

The Merger Agreement contains additional agreements between the parties thereto including agreements regarding, among other things (and subject to certain exceptions and limitations):

 

   

(i) cooperating in the preparation of a registration statement and the joint prospectus/consent statement/proxy statement constituting a part thereof, (ii) using commercially reasonable best efforts to cause the shares of SunCoke Common Stock issued in the Merger to be approved for trading on the NYSE (subject, if applicable, to notice of issuance) prior to the effective time of the Merger, and (iii) making all required filings under applicable state securities and “blue sky” laws;

 

   

filing the registration statement with the SEC as promptly as reasonably practicable and using all commercially reasonable efforts to cause the registration statement to be declared effective under the Securities Act as promptly as practicable after filing thereof and keep the registration statement effective until the earlier of the consummation of the transactions contemplated by the Merger Agreement and the termination of the Merger Agreement in accordance with its terms;

 

   

using reasonable best efforts to cause the joint prospectus/consent statement/proxy statement to be mailed to the holders of SunCoke Common Stock and SXCP Common Units as promptly as practicable after the registration statement is declared effective under the Securities Act;

 

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furnishing to the other party all information concerning the party and its subsidiaries, and to take such other action as may be reasonably requested in connection with the foregoing;

 

   

ensuring the accuracy of information in the registration statement and the joint prospectus/consent statement/proxy statement constituting a part thereof;

 

   

prompt notification of the receipt of any comments from the SEC or its staff or any other applicable government official and of any requests by the SEC or its staff or any other applicable government official for amendments or supplements to any of the filings in connection with the Merger and other transactions contemplated thereby or for additional information and prompt supply of all correspondence with the SEC or its staff or any other applicable government official with respect thereto;

 

   

using commercially reasonable efforts to respond to any comments of the SEC or its staff with respect to the joint prospectus/consent statement/proxy statement or the registration statement as promptly as practicable;

 

   

establishing a record date for, duly call, give notice of, convene and hold a special meeting of SunCoke Stockholders, as soon as practicable following the effective date of the registration statement, for the purpose of obtaining the Parent Stock Issuance Approval and using best efforts to obtain the Parent Stock Issuance Approval;

 

   

using commercially reasonable efforts to (i) take, or cause to be taken, all appropriate action, and to do or cause to be done, all things necessary, proper or advisable under applicable laws to consummate and make effective the transactions contemplated by the Merger Agreement as promptly as practicable and (ii) defend any lawsuits or other proceedings, whether judicial or administrative, challenging the Merger Agreement or the consummation of the transactions contemplated thereby or seek to have lifted or rescinded any injunction or restraining order or other order adversely affecting the ability of the parties to consummate the transactions contemplated thereby, including the Merger;

 

   

making certain public announcements in connection with the Merger Agreement or the transactions contemplated thereby;

 

   

paying costs and expenses incurred in connection with the Merger Agreement;

 

   

cooperating fully with respect to any filing, submission, or communication with a governmental entity having jurisdiction over the Merger;

 

   

tax matters;

 

   

using reasonable commercial efforts to cause SXCP to declare and pay regular quarterly cash distributions to SXCP Common Unitholders at the quarterly per unit distribution rate of $0.40, with the declaration date and record date for each quarterly distribution to occur no later than 35 days and 47 days, respectively, after the end of each fiscal quarter;

 

   

Section 16 matters; and

 

   

not, prior to the effective time of the Merger or the termination of the Merger Agreement, without the consent of the SXCP Conflicts Committee, (i) eliminating the SXCP Conflicts Committee, (ii) revoking or diminishing the authority of the SXCP Conflicts Committee, or (iii) removing or causing the removal of any director of the SXCP Board that is a member of the SXCP Conflicts Committee either as a member of the SXCP Board or the SXCP Conflicts Committee either as a member of such board or such committee without the affirmative vote of the members of the SXCP Board, including the affirmative vote of each of the other members of the SXCP Conflicts Committee.

Indemnification and Insurance

Subject to certain terms and conditions specified in the Merger Agreement, SunCoke has agreed to, for a period of six years after the effective time of the Merger:

 

   

indemnify and hold harmless against any reasonable costs or expenses, judgments, fines, losses, claims, damages or liabilities, penalties and amounts paid in settlement in connection with any actual or threatened

 

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proceeding arising from acts or omissions occurring at or prior to the effective time of the Merger and provide advancement of expenses to certain past and present directors and officers of each of the SXCP General Partner, SXCP and SXCP’s subsidiaries and any person who is or was serving as an officer, director, member, partner, agent fiduciary or trustee of another person at the request of the SXCP General Partner, SXCP or SXCP’s subsidiaries (the “SXCP D&O Indemnified Parties”) with respect to each of the foregoing;

 

   

honor all rights to indemnification, advancement of expenses, elimination of liability and exculpation from liabilities for acts or omissions occurring at or prior to the effective time of the Merger (including the transactions contemplated by the Merger Agreement) existing as of the date of the Merger Agreement in favor of the SXCP D&O Indemnified Parties;

 

   

ensure that the governing documents of SXCP and the SXCP General Partner (or their successor entities) contain provisions substantially no less advantageous with respect to indemnification, advancement of expenses, elimination of liability and exculpation of such entities’ present and former directors, officers, employees and agents than are set forth in the governing documents of SXCP and SXCP General Partner as of the date of the Merger Agreement; and

 

   

maintain officers’ and directors’ liability insurance with a nationally reputable carrier covering each SXCP D&O Indemnified Party who is or at any time prior to the effective time of the Merger was covered by the existing officers’ and directors’ liability insurance applicable to each of the SXCP General Partner, SXCP and SXCP’s subsidiaries on terms substantially no less advantageous to the SXCP D&O Indemnified Parties, as applicable, than such existing insurance with respect to acts or omissions, or alleged acts or omissions, prior to the effective time of the Merger.

These provisions are in addition to any other rights that certain of the directors and officers of each of the SXCP General Partner, SXCP and SXCP’s subsidiaries may have under the organizational documents of each of the SXCP General Partner, SXCP and SXCP’s subsidiaries or under applicable law.

SunCoke Board Recommendation and SunCoke Adverse Recommendation Change

On February 4, 2019, the SunCoke Board determined that the Merger Agreement and the transactions contemplated thereby, including the Merger and the Parent Stock Issuance, are in the best interests of SunCoke and the SunCoke Stockholders, approved and declared advisable the Merger Agreement and the transactions contemplated thereby, including the Merger and the Parent Stock Issuance, and resolved to submit the Parent Stock Issuance to a vote of SunCoke Stockholders and recommend approval of the Parent Stock Issuance at the SunCoke Special Meeting.

Subject to the exceptions described below, the Merger Agreement provides that SunCoke will not, through the SunCoke Board:

 

   

withdraw, modify or qualify, or propose publicly to withdraw, modify or qualify, in a manner adverse to SXCP, the SunCoke Board Recommendation; or

 

   

fail to include the SunCoke Board Recommendation in this joint prospectus/consent statement/proxy statement.

SunCoke taking any of the actions described above is referred to as a “SunCoke Adverse Recommendation Change.”

Subject to the conditions described below, the SunCoke Board may, at any time prior to the SunCoke Stockholders approving the Parent Stock Issuance, effect a SunCoke Adverse Recommendation Change if the SunCoke Board determines in good faith (after consultation with SunCoke’s financial advisor and outside legal counsel) that the failure to take such action would be inconsistent with its fiduciary duties to the SunCoke Stockholders under applicable law.

 

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Pursuant to the Merger Agreement, the SunCoke Board (i) is not permitted to make a SunCoke Adverse Recommendation Change in response to a SunCoke Acquisition Proposal that does not constitute a SunCoke Designated Proposal (each as defined below) and (ii) may not effect a SunCoke Adverse Recommendation Change unless:

 

   

SunCoke has provided prior written notice to the SXCP Conflicts Committee specifying in reasonable detail the reasons for such action (including, in the case of a SunCoke Designated Proposal, a description of the material terms of such SunCoke Designated Proposal and complete copies of any written proposals, offers and/or draft definitive agreements in connection therewith) at least three days in advance of its intention to take such action with respect to a SunCoke Adverse Recommendation Change, unless at the time such notice is required to be given there are less than three days remaining prior to the SunCoke Special Meeting, in which case SunCoke is required to provide as much notice as is reasonably practicable (the period inclusive of all such days, the “SunCoke Notice Period”); and

 

   

during the SunCoke Notice Period the SunCoke Board has negotiated, and has used reasonable best efforts to cause its financial advisor and outside legal counsel to negotiate, with the SXCP Conflicts Committee in good faith (to the extent the SXCP Conflicts Committee desires to negotiate) to make such adjustments in the terms and conditions of the Merger Agreement so that the failure to effect such SunCoke Adverse Recommendation Change would not be inconsistent with its fiduciary duties to stockholders under applicable law (provided that any material amendment to the terms of a SunCoke Designated Proposal, if applicable, will require a new notice as described above and a new SunCoke Notice Period, except that such new SunCoke Notice Period in connection with any material amendment will be for one business day from the time SXCP receives such notice (as opposed to three days)).

For purposes of the Merger Agreement:

 

   

the term “SunCoke Acquisition Proposal” means any inquiry, proposal or offer from any person or “group” (as defined in Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), other than the SXCP Parties or any subsidiaries of SXCP, relating to any:

 

   

direct or indirect acquisition (whether in a single transaction or a series of related transactions), outside of the ordinary course of business, of assets of SunCoke and its partially or wholly owned subsidiaries, excluding any the SXCP Parties or any subsidiaries of SXCP, (including securities of SunCoke subsidiaries) equal to 25% or more of the assets (based on fair market value) of SunCoke and its partially or wholly owned subsidiaries, excluding any the SXCP Parties or any subsidiaries of SXCP, taken as a whole, or to which 25% or more of the revenues or earnings (for the twelve-month period ending on the last day of SunCoke’s most recently completed fiscal quarter) of SunCoke and its partially or wholly owned subsidiaries, excluding any the SXCP Parties or any subsidiaries of SXCP, taken as a whole, are attributable;

 

   

direct or indirect acquisition (whether in a single transaction or a series of related transactions) of beneficial ownership (within the meaning of Section 13(d) under the Exchange Act) of 25% or more of any outstanding class of equity securities of SunCoke;

 

   

tender offer or exchange offer that if consummated would result in any person or “group” (as defined in Section 13(d) of the Exchange Act) beneficially owning 25% or more any outstanding class of equity securities of SunCoke; or

 

   

merger, consolidation, unit exchange, share exchange, business combination, recapitalization, liquidation, dissolution or similar transaction (whether in a single transaction or a series of related transactions) involving SunCoke which is structured to permit such person or group to acquire beneficial ownership of at least 25% of SunCoke’s consolidated assets or any class of outstanding equity interests.

 

   

the term “SunCoke Designated Proposal” means a bona fide written SunCoke Acquisition Proposal obtained after the date of the Merger Agreement, which is on terms and conditions which the SunCoke Board has

 

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determined in its good faith judgment is reasonably likely to be more favorable to the SunCoke Stockholders from a financial point of view than the transactions contemplated by the Merger Agreement, taking into account all financial, legal, financing, regulatory and other aspects of such offer and any changes to the terms of the Merger Agreement that as of the time of determination had been committed to by SXCP and the SunCoke in writing (provided that for purposes of the definition of “SunCoke Designated Proposal,” references in the term “SunCoke Acquisition Proposal” to “25%” will be deemed to be references to “50%”).

Termination

The Merger Agreement may be terminated at any time prior to the effective time of the Merger by the mutual written agreement of the parties thereto duly authorized by the SunCoke Board, on behalf of SunCoke, and by the SXCP Conflicts Committee, on behalf of SXCP. In addition, either of SXCP or SunCoke may terminate the Merger Agreement on its own prior to the effective time of the Merger if:

 

   

the Merger has not been consummated on or before September 30, 2019, provided that this right to terminate the Merger Agreement will not be available to the party seeking to terminate if such party failed to perform or observe in any material respect its obligations under the Merger Agreement in any manner that will have been the principal cause of, or resulted in, the failure of the Merger to occur on or before such date;

 

   

a governmental entity has issued an order, decree or ruling or taken any other action (including the enactment of any statute, rule, regulation, decree or executive order) permanently restraining, enjoining or otherwise prohibiting the Merger and such order, decree, ruling or other action (including the enactment of any statute, rule, regulation, decree or executive order) will have become final and non-appealable, provided that the party seeking to terminate the Merger Agreement has complied with its obligations under the Merger Agreement regarding certain filings, the SunCoke Special Meeting, the SunCoke Board Recommendation, commercially reasonable efforts to cause the Merger to occur, and other further assurances;

 

   

the other party breaches or fails to perform any of its representations, warranties, covenants or agreements in the Merger Agreement (or if any of the other party’s representations or warranties will fail to be true), or, in the case of SunCoke, if SC&C breaches or fails to perform any of its representations, warranties, covenants or agreements set forth in the Support Agreement, in each case, which breach or failure (i) would (if it occurred or was continuing as of the closing of the Merger) give rise to the failure of a condition to the Merger being satisfied, and (ii) is incapable of being cured, or is not cured, prior to the Termination Date, provided that the party seeking termination is not in breach of its representations and warranties under the Merger Agreement so as to give rise to a failure of the condition to the other party’s obligation to close under the Merger Agreement;

 

   

the Parent Stock Issuance Approval has not been obtained upon the conclusion of the SunCoke Special Meeting (it being understood by SXCP that SunCoke is permitted to terminate in such circumstance even where failure to obtain Parent Stock Issuance Approval is proximately caused by a withdrawal, modification, or qualification of the SunCoke Board Recommendation whether or not permitted by the Merger Agreement); or

 

   

a SunCoke Adverse Recommendation Change occurs.

Expense Reimbursement and Termination Fee

The Merger Agreement provides that in the event the Merger Agreement is terminated (a) by SXCP for a breach by SunCoke of any of SunCoke’s representations, warranties, or agreements in the Merger Agreement, or if any of SunCoke’s representations or warranties becomes untrue and such breach (i) results in a condition to the Merger not being satisfied, and (ii) is incapable of being cured, or is not cured, prior to the Termination Date (provided that SXCP is not in breach of its representations and warranties under the Merger Agreement so as to

 

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give rise to a failure of the condition to SunCoke’s obligation to close under the Merger Agreement), (b) by SXCP or SunCoke pursuant to a failure to obtain the Parent Stock Issuance Approval at the SunCoke Special Meeting, or (c) by SXCP or SunCoke pursuant to a SunCoke Adverse Recommendation Change, then SunCoke will pay to SXCP, within two business days after the termination date, (x) all the direct and indirect expenses and costs incurred by or on behalf of SXCP in connection with the negotiation, execution and delivery of the Merger Agreement and the transactions contemplated thereby and/or (y) a termination fee in the amount of $6,000,000 (except that no termination fee will be payable in the case of (b) above if there was no Parent Adverse Recommendation Change).

Amendment and Waiver

Subject to compliance with applicable laws, prior to the Closing, any provision of the Merger Agreement may be (a) consented to or waived in writing by the party benefited by the provision or (b) amended or modified at any time by an agreement in writing by the parties to the Merger Agreement; provided, however, that, in addition to any other approvals required by SXCP Parties’ constituent documents or under the Merger Agreement, the foregoing consents, waivers, amendments, or modifications in clauses (a) and (b), and any decision or determination by SXCP to (x) terminate the Merger Agreement or (y) enforce the Merger Agreement, must be approved by the SXCP Conflicts Committee.

Support Agreement

Concurrently with the execution of the Merger Agreement, SXCP and SC&C entered into the Support Agreement, pursuant to which, subject to the terms and conditions therein, SC&C has agreed to deliver the SC&C Written Consent covering all the SXCP Common Units beneficially owned by SC&C approving the Merger, the Merger Agreement and any other matters necessary for consummation of the Merger and other transactions contemplated by the Merger Agreement within two business days after the registration statement becomes effective under the Securities Act.

The Support Agreement also generally prohibits SC&C from transferring its SXCP Common Units. The Support Agreement terminates upon the earliest to occur of the effective time of the Merger, the termination of the Merger Agreement and the written agreement of the parties to the Support Agreement terminate the Support Agreement.

 

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THE MERGER PARTIES

SunCoke

SunCoke is a Delaware corporation formed in 2010 and headquartered in Lisle, Illinois, that became a publicly-traded company in 2011. SunCoke is the largest independent producer of high-quality coke in the Americas, as measured by tons of coke produced each year and, through its predecessor entities, has approximately 55 years of coke production experience. Coke is a principal raw material in the blast furnace steelmaking process and is produced by heating metallurgical coal in a refractory oven, which releases certain volatile components from the coal, thus transforming the coal into coke. SunCoke’s cokemaking ovens combust the coal’s volatile components liberated during the cokemaking process, where the resulting heat can be used to create steam or electricity for sale. SunCoke also provides handling and/or mixing services to steel, coke (including some of SunCoke’s domestic cokemaking facilities), electric utility, coal producing and other manufacturing based customers. SunCoke owns the SXCP General Partner, which owns a 2.0% general partner interest and IDRs in SXCP, and owns a 60.4% limited partner interest in SXCP. The remaining 37.6% interest in SXCP is held by SXCP Public Unitholders.

SXCP

SXCP is a Delaware limited partnership formed by SunCoke in July 2012 to own and operate certain coke production facilities and logistics terminals. SXCP also provides coal handling and/or mixing services at its logistics terminals. SXCP licenses its advanced heat recovery cokemaking process from SunCoke. On January 24, 2013, SXCP completed the initial public offering of its common units representing limited partner interests in SXCP. SXCP operates and owns a 98% interest in three domestic cokemaking facilities and operates and owns four domestic logistics and coal handling terminals.

SC Energy Acquisition LLC

SC Energy Acquisition LLC, which is referred to in this joint prospectus/consent statement/proxy statement as Merger Sub, is a Delaware limited liability company and a wholly owned subsidiary of SunCoke. Merger Sub was formed on January 30, 2019, solely for the purpose of consummating the Merger and has no operating assets. Merger Sub has not carried on any activities to date, except for activities incidental to its formation and activities undertaken in connection with the Merger.

Executive Offices of SunCoke, SXCP, and Merger Sub

The principal executive offices of SunCoke, SXCP and Merger Sub are located at 1011 Warrenville Road, Suite 600, Lisle, IL 60532. The telephone number of both of SunCoke and Merger Sub is (630) 824-1907 and the telephone number of SXCP is (630) 824-1987. The SunCoke website is located at http://www.suncoke.com/English/Home/default.aspx and the SXCP website is located at http://www.suncoke.com/English/investors/sxcp/overview/default.aspx.

SunCoke and SXCP each make available their periodic reports and other information filed with or furnished to the SEC, free of charge, through their respective websites, as soon as reasonably practicable after those reports and other information are electronically filed with or furnished to the SEC. Information on the foregoing websites or any other website is not incorporated by reference into this joint prospectus/consent statement/proxy statement and does not constitute a part of this joint prospectus/consent statement/proxy statement.

 

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COMPARISON OF THE RIGHTS OF SUNCOKE STOCKHOLDERS

AND SXCP COMMON UNITHOLDERS

SunCoke is a Delaware corporation, while SXCP is a Delaware limited partnership. Ownership interests in a limited partnership are fundamentally different from ownership interests in a corporation. The rights of SunCoke Stockholders are governed by the SunCoke Organizational Documents and the DGCL. The rights of SXCP Common Unitholders are governed by the SXCP Partnership Agreement and the Delaware Revised Uniform Limited Partnership Act (the “Delaware Partnership Act”). If the Merger is completed, the rights of SXCP Common Unitholders as SunCoke Stockholders following the conversion of the SXCP Public Unitholders’ SXCP Common Units to SunCoke Common Stock will be governed by the SunCoke Organizational Documents and the DGCL.

There are many differences between the rights of SXCP Common Unitholders and SunCoke Stockholders. Some of these, such as distribution/dividend rights and voting rights, are significant. The following description summarizes the material differences that may affect the rights of SunCoke Stockholders and SXCP Common Unitholders but does not purport to be a complete statement of all of those differences, or a complete description of the specific provisions referred to in this summary. The identification of specific differences is not intended to indicate that other equally significant or more significant differences do not exist. SXCP Common Unitholders should carefully read the SunCoke Organizational Documents and the SXCP Partnership Agreement in their entirety. Copies of the documents referred to in this summary may be obtained as described under “Where You Can Find More Information.” This summary is qualified in its entirety by reference to the DGCL, the Delaware Partnership Act, the SunCoke Organizational Documents, and the SXCP Partnership Agreement. Capitalized terms used herein and not otherwise defined herein have the meanings given to them in the SunCoke Organizational Documents and the SXCP Partnership Agreement, as applicable.

 

SunCoke

  

SXCP

Purpose and Term of Existence

  
SunCoke’s stated purpose is to engage in any lawful act or activity for which corporations may be organized under the DGCL. SunCoke is to have perpetual existence.    SXCP’s stated purposes under the SXCP Partnership Agreement are to engage directly or indirectly in any lawful business activity that is approved by the SXCP General Partner, in its sole discretion, and to exercise all rights and powers conferred upon SXCP pursuant to any agreements relating to such business activity and to do anything necessary or appropriate to the foregoing, including the making of capital contributions or loans to SXCP’s subsidiaries. However, the SXCP General Partner shall not cause SXCP to engage directly or indirectly in any business activity that the SXCP General Partner determines would be reasonably likely to cause SXCP to be treated as an association taxable as a corporation or otherwise taxable as an entity for federal income tax purposes. The SXCP General Partner has no duty or obligation to propose or approve, and may, in its sole discretion, decline to propose or approve, the conduct by SXCP of any business.
   SXCP’s partnership term will continue until SXCP is dissolved pursuant to the terms of the SXCP Partnership Agreement. SXCP’s existence as a separate legal entity will continue until cancellation of its certificate of limited partnership pursuant to the Delaware Partnership Act.

 

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SunCoke

  

SXCP

Authorized Capital

  

SunCoke’s authorized capital stock consists of:

 

•   300,000,000 shares of Common Stock, $0.01 par value per share (as defined elsewhere in this joint prospectus/consent statement/proxy statement, the “SunCoke Common Stock”), 65,094,789 shares of which were outstanding as of March 7, 2019; and

 

•   50,000,000 shares of Preferred Stock, $0.01 par value per share (the “Preferred Stock”), none of which were outstanding as of the date of this joint prospectus/consent statement/proxy statement.

 

On each matter on which the holders of capital stock are entitled to vote, each holder of shares of SunCoke Common Stock is entitled to one vote per share of SunCoke Common Stock held. Except as otherwise required by law or by the SunCoke Certificate, holders of each class of capital stock vote together as a single class.

  

As of March 7, 2019, the outstanding capitalization of SXCP consisted of: 46,227,148 SXCP Common Units, 28,499,899 of which were indirectly owned by SunCoke through SunCoke’s ownership of 100% of the membership interests of SC&C; the General Partner Interest, all of which was indirectly owned by SunCoke through SunCoke’s indirect ownership of 100% of the membership interests of the SXCP General Partner; and the IDRs, all of which were indirectly owned by SunCoke through SunCoke’s indirect ownership of 100% of the membership interests of the SXCP General Partner. The SXCP General Partner currently holds the IDRs but may transfer these rights separately from the General Partner Interest, subject to restrictions in the SXCP Partnership Agreement.

 

SXCP may issue additional Partnership Interests and options, rights, warrants and appreciation rights relating to the Partnership Interests for any partnership purpose at any time and from time to time to such persons for such consideration and on such terms and conditions as the SXCP General Partner shall determine, including in additional classes or series, with such designations, preferences, rights, powers and duties (which may be senior to existing classes and series of Partnership Interests), all without the approval of any Unitholders. The SXCP Partnership Agreement defines “Partnership Interest” as meaning any class or series of equity interest in SXCP, including any General Partner Interest and Limited Partner Interests, but excluding options, rights, warrants and appreciation rights relating to an equity interest in SXCP. The SXCP Partnership Agreement defines “Unitholders” as the holders of Units and defines “Unit” as a Partnership Interest that is designated as a “Unit” and shall include Common Units and Subordinated Units but does not include the General Partner Interest or IDRs. As of the date of this joint prospectus/consent statement/proxy statement, the SXCP Common Units represented all of the issued and outstanding Units of SXCP and the SXCP Common Unitholders represented all of the SXCP Common Unitholders of record of SXCP.

SunCoke Dividends; SXCP Distributions

  
SunCoke Stockholders are entitled to receive, to the extent permitted by law, such dividends as may be declared by the SunCoke Board, out of funds legally available for their payment.    The SXCP Partnership Agreement categorizes distributions as either distributions from Operating Surplus or distributions from Capital Surplus. The SXCP Partnership Agreement establishes different

 

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SunCoke

  

SXCP

  

“waterfalls” for distributions of cash and cash equivalents from Operating Surplus and for distributions of cash and cash equivalents from Capital Surplus. “Operating Surplus” distributions are made prior to any “Capital Surplus” distributions.

 

Distributions of Cash from Operating Surplus. The term “Operating Surplus” is more particularly described in the SXCP Partnership Agreement, and is generally comprised of $26.5 million; plus certain cash receipts; plus cash distributions paid on certain equity issued to finance construction, acquisition or development projects; plus proceeds of SXCP’s initial public offering retained to offset discounts related to certain tax credits; less operating expenditures following SXCP’s initial public offering; less the amount of cash reserves established by SXCP General Partner to provide funds for future operating expenditures; less all Working Capital Borrowings (as defined in the SXCP Partnership Agreement) not repaid within 12 months of being incurred or repaid within such period with the proceeds of additional Working Capital Borrowings; less any cash loss realized on the disposition of an investment capital expenditure.

 

SXCP distributes cash and cash equivalents from Operating Surplus, if any, with respect to any fiscal quarter as follows: first, 98% to all SXCP Common Unitholders, pro rata, and 2% to the SXCP General Partner, until SXCP distributes for each outstanding unit an amount equal to the minimum quarterly distribution for that quarter; second, 98% to all SXCP Common Unitholders, pro rata, and 2% to the SXCP General Partner, until SXCP distributes for each outstanding unit an amount equal to the First Target Distribution (as defined in the SXCP Partnership Agreement); third, 85% to all SXCP Common Unitholders, pro rata, and 15% to the SXCP General Partner, until SXCP distributes for each outstanding unit an amount equal to the Second Target Distribution (as defined in the SXCP Partnership Agreement); fourth, 75% to all SXCP Common Unitholders, pro rata, and 25% to the SXCP General Partner, until SXCP distributes for each outstanding unit an amount equal to the Third Target Distribution (as defined in the SXCP Partnership Agreement); and thereafter, 50% to all SXCP Common Unitholders, pro rata, and 50% to the SXCP General Partner. This is based on the assumptions that SXCP General Partner maintains its 2% General Partner Interest and holds all of the IDRs and that SXCP does not issue additional classes of Partnership Interests.

 

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SunCoke

  

SXCP

   Distributions of Cash from Capital Surplus. The term “Capital Surplus” means cash and cash equivalents distributed by SXCP in excess of Operating Surplus. SXCP distributes cash and cash equivalents from Capital Surplus, if any, with respect to any fiscal quarter as follows: first, 98% to all SXCP Common Unitholders, pro rata, and 2% to the SXCP General Partner, until the minimum quarterly distribution has been reduced to zero; second, 98% to all SXCP Common Unitholders, pro rata, and 2% to the SXCP General Partner, until each SXCP Common Unitholder has received a total amount equal to the Cumulative Common Unit Arrearage (as defined in the SXCP Partnership Agreement); and thereafter, in such a manner as if such distributions of cash and cash equivalents were being made from Operating Surplus.
   The preceding discussion is based on the assumption that the SXCP General Partner maintains its 2% General Partner Interest and holds all of the IDRs and that SXCP does not issue additional classes of Partnership Interests.
   Each time a distribution of cash and cash equivalents from Capital Surplus is made, the Target Distributions will be adjusted proportionately downward in the same proportion that the distribution had to the fair market value of the SXCP Common Units immediately prior to the announcement of the distribution.

Merger or Consolidation

  

Subject to limited exceptions, under the DGCL, the consummation of a merger or consolidation requires the board of directors of a corporation that is a constituent corporation in the merger or consolidation to approve and declare advisable the agreement of merger or consolidation and requires that the agreement of merger or consolidation be adopted by the affirmative vote of a majority of the outstanding stock of that corporation entitled to vote thereon at an annual or special meeting for the purpose of acting on the agreement.

 

SunCoke is subject to the provisions of Section 203 of the DGCL. With respect to SunCoke, Section 203 prohibits SunCoke from engaging in a business combination with any interested stockholder for a three-year period following the time that such stockholder becomes an interested stockholder, unless (i) the SunCoke Board approves the transaction by which the stockholder becomes an interested stockholder or approves the business combination, in each case before the stockholder

   The merger or consolidation of SXCP requires the prior consent of the SXCP General Partner, which the SXCP General Partner may withhold free of any fiduciary duty or obligation whatsoever. The SXCP General Partner must also approve the merger agreement, which must include certain information as set forth in the SXCP Partnership Agreement. Subject to certain exceptions set forth in the SXCP Partnership Agreement and described below, once approved by the SXCP General Partner, the merger agreement and the merger or consolidation contemplated thereby, as applicable, must be submitted to a vote of the Limited Partners, and the merger agreement will be approved upon receipt of the affirmative vote or consent of the holders of a majority of the outstanding SXCP Common Units, voting as a single class (as defined in the SXCP Partnership Agreement, a “Unit Majority”) unless the merger agreement contains a provision that, if contained in an amendment to the SXCP Partnership

 

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SunCoke

  

SXCP

becomes an interested stockholder, (ii) the interested stockholder acquires 85% of SunCoke’s outstanding voting stock (excluding certain stock) in the transaction by which such stockholder becomes an interested stockholder, or (iii) the business combination is subsequently approved by the SunCoke Board and approved at a meeting of stockholders by the affirmative vote of the holders of at least 66 2/3% of SunCoke’s outstanding voting stock not owned by the interested stockholder. See the section titled “Description of SunCoke Common Stock—Certain Provisions in the SunCoke Organizational Documents.”   

Agreement, would require a greater percentage of the outstanding SXCP Common Units, in which case such greater percentage shall be required.

 

The SXCP General Partner may consummate any conversion, merger or conveyance without the prior approval of the SXCP Common Unitholders if (i) the SXCP General Partner has received an opinion of counsel that the merger or conveyance, as the case may be, would not result in the loss of limited liability of any Limited Partner or cause SXCP or any Group Member to be treated as an association taxable as a corporation or otherwise to be taxed as an entity for federal income tax purposes (to the extent not already treated as such), (ii) the sole purpose of such merger, or conveyance is to effect a mere change in the legal form of SXCP into another limited liability entity and (iii) the governing instruments of the new entity provide the Limited Partners and the SXCP General Partner with substantially the same rights and obligations as are contained in the SXCP Partnership Agreement.

 

In addition, the SXCP General Partner may consummate any merger or consolidation of SXCP with or into another entity, without the prior approval of the SXCP Common Unitholders, if: (i) the SXCP General Partner has received an opinion of counsel that the merger or consolidation, as the case may be, would not result in the loss of the limited liability of any Limited Partner or cause SXCP or any Group Member to be treated as an association taxable as a corporation or otherwise to be taxed as an entity for federal income tax purposes (to the extent not already treated as such), (ii) the merger or consolidation would not result in an amendment to the SXCP Partnership Agreement that could not otherwise be adopted solely by the SXCP General Partner, (iii) SXCP is the surviving entity in such merger or consolidation, (iv) each Partnership Interest in SXCP outstanding immediately prior to the effective date of the merger or consolidation is to be an identical Partnership Interest of SXCP after the effective date of the merger or consolidation, and (v) the number of Partnership Interests to be issued by SXCP in such merger or consolidation does not exceed 20% of the Partnership Interests (other than the IDRs) outstanding immediately prior to the effective date of such merger or consolidation.

 

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SunCoke

  

SXCP

Disposal of Assets

  
Under the DGCL, a corporation may not, without the affirmative vote of the holders of a majority of the outstanding stock entitled to vote, sell, lease, or exchange all or substantially all the assets of the corporation.    The SXCP General Partner generally may not, without approval by a Unit Majority, sell, exchange, or otherwise dispose of all or substantially all the assets of SXCP and its subsidiaries in a single transaction or a series of related transactions. However, the SXCP General Partner may, without such approval, (i) mortgage, pledge, hypothecate, or grant a security interest in all or substantially all of SXCP’s assets or (ii) sell any or all of SXCP’s assets in a forced sale pursuant to the foreclosure of, or other realization upon, any such encumbrance.

Management by SunCoke Board; SXCP General Partner

  

In accordance with the DGCL, SunCoke’s business and affairs are managed by or under the direction of the SunCoke Board.

 

The SunCoke Bylaws provide that the SunCoke Board shall consist of a number of directors to be determined from time to time by resolution adopted by the affirmative vote of a majority of the entire SunCoke Board. As of the date of this joint prospectus/consent statement/proxy statement, the SunCoke Board consists of seven directors.

   The SXCP General Partner conducts, directs, and manages all activities of SXCP. Except as expressly provided in the SXCP Partnership Agreement, all management powers over the business and affairs of SXCP are exclusively vested in the SXCP General Partner, and no Limited Partner has any management power over the business and affairs of SXCP. The SXCP General Partner has full power and authority to do all things and, on such terms, as it determines to be necessary or appropriate to conduct SXCP’s business.

Nomination and Election of SunCoke Board; SXCP General Partner

  
Nominations of persons for election to the SunCoke Board may be made at any annual meeting of stockholders, or at any special meeting of stockholders called for the purpose of electing directors, (a) by or at the direction of the SunCoke Board (or any duly authorized committee thereof) or (b) provided that the SunCoke Board has determined that directors will be elected at such meeting, by any stockholder of record on the date of the giving of notice and on the record date for the determination of stockholders entitled to vote at such meeting, who is entitled to vote at the meeting, and who complies with the notice procedures set forth in the SunCoke Bylaws. See “Stockholder Proposals and Director Nominations” below.    Unitholders have no right to elect the SXCP General Partner unless the SXCP General Partner has been removed or withdrawn, as described below, and have no right to elect the directors of the SXCP General Partner.
Directors are elected by the affirmative vote of a majority of the votes cast with respect to that director’s election at any meeting for the election of directors at which a quorum is present.   
Once elected, directors hold office for a three-year term and remain in office until a successor is duly elected and qualified, or, if earlier, until their death, resignation, or removal from office.   

 

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SunCoke

  

SXCP

Removal of SunCoke Directors; Withdrawal or Removal of the SXCP General Partner

  
Any director, or the entire SunCoke Board, may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least 80 percent of the voting power of all of the then-outstanding shares then entitled to vote at an election of directors, voting together as a single class, subject to certain exceptions.    Withdrawal of the SXCP General Partner. At any time prior to September 30, 2022, the SXCP General Partner may withdraw as the general partner by giving 90 days’ advance written notice and obtaining the approval of the holders of at least a majority of the outstanding Units, excluding those held by the SXCP General Partner and its affiliates, and furnishing an opinion of counsel stating that such withdrawal (following the selection of the successor General Partner) would not result in the loss of the limited liability of any of the Limited Partners or cause SXCP or any of its subsidiaries to be treated as an association taxable as a corporation or otherwise to be taxed as an entity for federal income tax purposes (the “Withdrawal Opinion”), and such withdrawal will not constitute a breach of the SXCP Partnership Agreement.
   At any time after September 30, 2022, the SXCP General Partner may withdraw as the general partner without first obtaining Unitholder approval by giving 90 days’ advance written notice, and such withdrawal will not constitute a breach of the SXCP Partnership Agreement. Notwithstanding the preceding paragraph, the SXCP General Partner may withdraw without Unitholder approval upon 90 days’ notice to the Limited Partners if at least 50% of the outstanding Units are held or controlled by one person and its affiliates (other than the SXCP General Partner and its affiliates).
   Removal of the SXCP General Partner. The SXCP General Partner may not be removed unless that removal is approved by the vote of the holders of not less than 66 2/3 % of the outstanding Units (including Units held by the SXCP General Partner and its affiliates) voting together as a single class. Any action by Unitholders for the removal of the SXCP General Partner must also provide for the election of a successor General Partner by a Unit Majority, voting as a separate class, and by a majority of the outstanding Subordinated Units (if any Subordinated Units are then outstanding), voting as a separate class (including, in each case, Units held by the SXCP General Partner and its affiliates). In addition, any such removal of the SXCP General Partner will be effective immediately following the admission of a successor general partner.

 

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SunCoke

  

SXCP

   If the SXCP General Partner (i) withdraws not in breach of the SXCP Partnership Agreement or (ii) is removed without cause, and the successor general partner is elected pursuant to the SXCP Partnership Agreement, it has the option to require its successor to purchase its General Partner Interest and IDRs at fair market value. If the SXCP General Partner (i) withdraws in breach of the SXCP Partnership Agreement or (ii) is removed for cause, its successor has the option to purchase the SXCP General Partner’s General Partner Interest and IDRs at fair market value.

Filling Vacancies on the SunCoke Board; Replacing the SXCP General Partner

  
Under the SunCoke Certificate, vacancies on the SunCoke Board arising through death, resignation, retirement, disqualification, removal, or otherwise, or any newly created directorship resulting from an increase in the authorized number of directors, may be filled only by a majority of the directors then in office, although such majority is less than a quorum, or at a special meeting of the stockholders by the holders of shares of capital stock of SunCoke entitled to vote for the election of directors, and the directors so chosen will hold office until the annual meeting of stockholders at which the term of office of the class to which they have been appointed expires and until their successors are duly elected and qualified, or until their earlier death, resignation or removal.   

Replacement Following Withdrawal of the SXCP General Partner. Upon the voluntary withdrawal of the SXCP General Partner, the holders of a Unit Majority may elect a successor to the withdrawing SXCP General Partner. If a successor is not elected, or a Withdrawal Opinion cannot be obtained, SXCP will be dissolved, wound up and liquidated, unless within a specified time period after that withdrawal, the holders of a majority of the outstanding Units agree to continue SXCP’s business and to appoint a successor General Partner.

 

Replacement Following Removal of the SXCP General Partner. As described above under “Removal of SunCoke Directors; Withdrawal or Removal of the SXCP General Partner,” any action by Unitholders for the removal of the SXCP General Partner must also provide for the election of a successor General Partner by a Unit Majority, voting as a separate class, and by a majority of the outstanding Subordinated Units (if any Subordinated Units are then outstanding), voting as a separate class (including, in each case, Units held by the SXCP General Partner and its affiliates). In addition, any such removal of the SXCP General Partner will only be effective if SXCP receives a Withdrawal Opinion.

Transfer of General Partner Interest

  
Not applicable.    Prior to September 30, 2022, the SXCP General Partner may not transfer all or any part of its General Partner Interest in SXCP unless (i) such transfer has been approved by the prior written consent or vote of the holders of at least a majority of the outstanding SXCP Common Units (excluding any SXCP Common Units held by the SXCP General Partner

 

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SunCoke

  

SXCP

  

and its affiliates) upon proper notice, (ii) the transferee agrees to assume the rights and duties of the SXCP General Partner under the SXCP Partnership Agreement and to be bound by the provisions thereunder, (iii) SXCP receives an opinion of counsel that such transfer would not result in the loss of the limited liability of any of the Limited Partners or cause SXCP or any of its subsidiaries to be treated as an association taxable as a corporation or otherwise to be taxed as an entity for federal income tax purposes, and (iv) such transferee agrees to purchase all of the SXCP interest held by the SXCP General Partner.

 

After September 30, 2022, the SXCP General Partner may transfer all or any of its General Partner Interest without Unitholder approval.

Limited Call Rights

  

Not applicable.

   If at any time the SXCP General Partner and its affiliates hold more than 80% of the outstanding Limited Partnership Interests of any class then outstanding, the SXCP General Partner will have the right, which it may assign in whole or in part to its affiliates or to SXCP, to purchase all, but not less than all, of such Limited Partnership Interests of such class then outstanding that are held by unaffiliated persons as of a record date to be selected by the SXCP General Partner, and shall cause the transfer agent to mail a notice of such election to purchase to such record holders (the “Notice of Election”) at least 10 but not more than 60 days prior to the purchase date. The purchase price in the event of a purchase under these circumstances would be the greater of (i) the Current Market Price (as defined in the SXCP Partnership Agreement) of the applicable Limited Partnership Interests as of the date three days before the date the Notice of Election is mailed and (ii) the highest price paid by the SXCP General Partner or any of its affiliates for any such Limited Partnership Interests within the 90 days preceding the date the SXCP General Partner mails the Notice of Election.

Preemptive Rights

  
Stockholders have no preemptive rights to purchase additional shares of SunCoke Common Stock or other securities.    The SXCP General Partner has the right, which it may from time to time assign in whole or in part to any of its affiliates, to purchase Partnership Interests from SXCP or make additional capital contributions to SXCP whenever, and on the same terms that, SXCP issues Partnership Interests to persons other

 

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   than the SXCP General Partner and its affiliates, to the extent necessary to maintain the percentage ownership interests of the SXCP General Partner and its affiliates equal to that which existed immediately prior to the issuance of such Partnership Interests. No other holder of any Partnership Interest or any other person has preemptive rights to acquire additional Partnership Interests.

Amendment of Governing Documents

  

SunCoke Certificate. The SunCoke Certificate may be amended in any manner provided by the DGCL. Articles XI, XII, XIII, XIV and XV of the SunCoke Certificate may only be amended or repealed by the affirmative vote of the holders of record of no less than eighty percent of the voting power of the shares entitled to vote generally in the election of directors.

 

SunCoke Bylaws. The SunCoke Certificate provides that the SunCoke Bylaws may be adopted, amended or repealed by the vote of a majority of the SunCoke Board, but any provision adopted by the SunCoke Board may be amended or repealed by a stockholder vote. The SunCoke Bylaws provide that the SunCoke Bylaws may be altered, amended or repealed at any meeting of the stockholders, provided proper notice was given.

  

Amendments to the SXCP Partnership Agreement may be proposed only by the SXCP General Partner. The SXCP General Partner has no duty or obligation to propose or approve any amendment and may decline to do so in its sole discretion and in declining to propose or approve an amendment, has no duty to act in good faith or pursuant to any standard imposed by the SXCP Partnership Agreement or the partnership agreement of any subsidiary or other agreement or the Delaware Partnership Act. An amendment shall be effective upon the approval by the SXCP General Partner and a Unit Majority. Any amendment that materially and adversely affects the rights or preferences of any type or class of Partnership Interest in relation to other types or classes of Partnership Interests will require the approval of at least a majority of the type or class of Partnership Interest so affected. However, in some circumstances, more particularly described in the SXCP Partnership Agreement, the SXCP General Partner may amend the SXCP Partnership Agreement without the approval of the Limited Partners or their assignees to reflect:

 

•   a change in the name of SXCP, the location of its principal place of business, its registered agent, or its registered office;

 

•   the admission, substitution, withdrawal, or removal of Partners;

 

•   a change that the SXCP General Partner determines to be necessary or appropriate to qualify or continue the qualification of SXCP as a limited partnership or a partnership in which the Limited Partners have limited liability under the laws of any state or to ensure that SXCP and its subsidiaries will not be treated as associations taxable as corporations or otherwise taxed as entities for U.S. federal income tax purposes;

 

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•   a change that the SXCP General Partner determines does not adversely affect the Limited Partners (or any particular class of Limited Partners as compared to other classes of Limited Partners) in any material respect;

 

•   a change that the SXCP General Partner determines to be necessary or appropriate to (i) satisfy any requirements, conditions or guidelines contained in any opinion, directive, order, ruling, or regulation of any federal or state agency or judicial authority or contained in any federal or state statute or (ii) facilitate the trading of the SXCP Common Units (including the division of any class or classes of outstanding SXCP Common Units into different classes to facilitate uniformity of tax consequences within such classes of SXCP Common Units) or comply with any rule, regulation, guideline, or requirement of any national securities exchange on which the SXCP Common Units are or will be listed or admitted for trading;

  

•   a change that the SXCP General Partner determines to be necessary or appropriate in connection with splits or combinations of Partnership Interests;

  

•   a change required to effect the intent expressed in the Registration Statement on Form S-1 as it has been or as it may be amended from time to time, filed by SXCP with the SEC to register the offering and sale of the SXCP Common Units in SXCP’s initial offering or the intent of the provisions of the SXCP Partnership Agreement or otherwise contemplated by the SXCP Partnership Agreement;

  

•   a change in SXCP’s fiscal year or taxable period and any changes that the SXCP General Partner determines are necessary or appropriate as a result of a change in SXCP’s fiscal year or taxable period;

  

•   an amendment that is necessary, as set forth in an opinion of counsel, to prevent SXCP, or the SXCP General Partner or its directors, officers, trustees, or agents from in any manner being subjected to the provisions of the Investment Company Act, the Investment Advisers Act of 1940, as amended, or “plan asset” regulations adopted under the Employee Retirement Income Security Act of 1974, as amended, whether or not substantially similar to plan asset regulations currently applied or proposed by the United States Department of Labor;

 

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•   an amendment that the SXCP General Partner determines to be necessary or appropriate in connection with the creation, authorization or issuance of any class or series of Partnership Interests and options, rights, warrants and appreciation rights relating to the issuance of additional Partnership Interests;

  

•   any amendment expressly permitted by the SXCP Partnership Agreement to be made by the SXCP General Partner acting alone;

  

•   an amendment effected, necessitated, or contemplated by a merger agreement approved in accordance with the SXCP Partnership Agreement;

  

•   an amendment that the SXCP General Partner determines to be necessary or appropriate to reflect and account for the formation by SXCP of, or an investment by SXCP in, any corporation, partnership, joint venture, limited liability company or other entity, in connection with the conduct by SXCP of activities permitted by the SXCP Partnership Agreement;

  

•   a merger or conveyance to effect a change in SXCP’s legal form; or

  

•   any other amendments substantially similar to the foregoing.

   Proposed amendments (other than those described above) must be approved by the SXCP General Partner and the holders of at least a Unit Majority, unless a greater or different percentage is required under the SXCP Partnership Agreement or by Delaware law. No provision of the SXCP Partnership Agreement that establishes a percentage of outstanding SXCP Common Units (including SXCP Common Units deemed owned by the SXCP General Partner) or requires a vote or approval of Limited Partners (or a subset of Limited Partners) holding a specified percentage interest required to take any action shall be amended, altered, changed, repealed, or rescinded to reduce such voting percentage unless such amendment is approved by the written consent or the affirmative vote of holders of outstanding SXCP Common Units whose aggregate outstanding SXCP Common Units constitute not less than the voting requirement sought to be reduced or increased, as applicable or the affirmative vote of Limited Partners whose aggregate percentage interests constitute not less than the voting requirement sought to be reduced, if applicable.

 

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   No amendment to the SXCP Partnership Agreement (other than those that may be made by the SXCP General Partner without the approval of the Limited Partners) may enlarge the obligations of any Limited Partner without its consent, unless approved by at least a majority of the type or class of Limited Partner interests so affected. No amendment to the SXCP Partnership Agreement may enlarge the obligations of, restrict, change or modify in any way any action by or rights of, or reduce in any way the amounts distributable, reimbursable, or otherwise payable to, the SXCP General Partner or any of its affiliates, without the consent of the SXCP General Partner, which may be given or withheld at its option.
   No amendment to the SXCP Partnership Agreement (other than those that may be made by the SXCP General Partner without the approval of the Limited Partners) will become effective without the approval of the holders of at least 90% of the Partnership Interests of all Limited Partners voting together as a single class unless SXCP obtains an opinion of counsel to the effect that such amendment will not affect the limited liability of any Limited Partner under applicable law.

Meetings, Voting and Action by Written Consent

  

SunCoke Stockholders are entitled to one vote per share on all matters submitted to a vote of stockholders, and, except as otherwise required by law, vote together as a single class.

 

The SunCoke Bylaws provide that special meetings of the stockholders may only be called by (a) the chairman of the SunCoke Board or (b) the SunCoke Board pursuant to a resolution adopted by a majority of the total number of directors which SunCoke would have if there were no vacancies. The SunCoke Bylaws prohibit the conduct of any business at a special meeting other than as specified in the notice for such meeting.

 

Any action which may be taken by a vote of the SunCoke stockholders at a meeting may be taken without a meeting by one or more consents in writing, setting forth the action so taken or to be taken, bearing the date of signature and signed by all of the persons who would be entitled to vote upon such action at a meeting, or by their duly authorized attorneys, subject to certain exceptions.

   Each Unitholder of record has a vote according to its percentage interest in SXCP, although additional Limited Partner interests having special voting rights could be issued. However, if at any time any person or group, other than the SXCP General Partner or its affiliates, beneficially owns 20% or more of the Partnership Interests of any class then outstanding, none of the Partnership Interests of any class owned by such person or group will be entitled to vote on any matter and will not be considered to be outstanding when sending notices of a meeting of Limited Partners to vote on any matter, calculating required votes, determining the presence of a quorum, or for other similar purposes. The foregoing limitations do not apply to (i) any person or group that acquired 20% or more of any such Partnership Interests directly from the SXCP General Partner or its affiliates (other than SXCP), (ii) any person or group that acquired 20% or more of any such Partnership Interests directly or indirectly from an initial transferee of the SXCP General Partner or its affiliates (provided that the SXCP General Partner has notified such ultimate transferee that the foregoing limitations do not apply), or (iii) any person or group that acquired 20% or more of any such Partnership Interests with the prior approval of the SXCP Board.

 

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   With respect to SXCP Common Units that are held for a person’s account by another person (such as a broker, dealer, bank, trust company or clearing corporation, or any agent of any of the foregoing), in whose name such SXCP Common Units are registered, such other person shall, in exercising the voting rights in respect of such SXCP Common Units on any matter, and unless the arrangement between such persons provides otherwise, vote such SXCP Common Units in favor of, and at the direction of, the person who is the beneficial owner, and SXCP shall be entitled to assume it is so acting without further inquiry.
   Special meetings of Limited Partners may be called by the SXCP General Partner or by Limited Partners owning 20% or more of the outstanding units of the class or classes for which a meeting is proposed, in accordance with the procedures set forth in the SXCP Partnership Agreement. Limited Partners shall call a special meeting by delivering to the SXCP General Partner one or more requests in writing stating that the signing Limited Partners wish to call a special meeting and indicating the general or specific purposes for which the special meeting is so called. The SXCP General Partner must send notice of the meeting to all Limited Partners within 60 days after receipt of such call from the Limited Partners or within such greater time as may be reasonably necessary for SXCP to comply with statutes or other similar requirements governing the holding of a meeting or the solicitation of proxies for use at such meeting and any such meeting may be held not less than 10 days or more than 60 days after the mailing of notice of the meeting. Limited Partners may vote either in person or by proxy at meetings. The holders of a majority, by percentage interest, of the Partnership Interests of the class or classes for which a meeting has been called, represented in person or by proxy, will constitute a quorum unless any such action requires approval by holders of a greater percentage interest, in which case the quorum will be the greater percentage.
   If authorized by the SXCP General Partner, any action that is required or permitted to be taken by the Limited Partners may be taken either at a meeting of the Limited Partners or without a meeting, without a vote and without prior notice, if consented to in writing by Limited Partners owning not less than the minimum percentage, by percentage interests, of the Partnership Interests of the class or classes for which a meeting has been called necessary to authorize or take that action at such meeting.

 

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Stockholder Proposals and Director Nominations

  
The SunCoke Bylaws establish advance notice procedures with respect to stockholder proposals for annual meetings and stockholder nomination of candidates for election as directors at annual or special meetings. To be timely, a stockholders’ notice for an annual meeting must be given to the SunCoke secretary no earlier than the 120th day prior and no later than the 90th day prior to the anniversary of the previous year’s annual meeting (unless the annual meeting is called for a date not within 30 days before or more than 60 days after such anniversary date, in which case notice must be received not earlier than the 120th day prior to the date of such annual meeting and not later than the 90th day prior to the date of such annual meeting, or if the first public announcement of the date of the annual meeting is less than 100 days prior to the date of such meeting, on the 10th day following the day on which public disclosure of the date of the annual meeting was made). A stockholder notice for a special meeting to elect directors must be provided no later than 10 and no more than 60 days before the date of the special meeting. A stockholder notice must also provide certain information and make certain representations.    Not applicable.

Limitation on Liability; Indemnification; Advancement of Expenses

  

The DGCL authorizes corporations to limit or eliminate the personal liability of directors to corporations and their stockholders for monetary damages for breaches of directors’ fiduciary duties. However, the DGCL does not permit exculpation for liability:

 

•   for breach of the duty of loyalty;

 

•   for acts or omissions not in good faith or involving intentional misconduct or a knowing violation of law;

 

•   under Section 174 of the DGCL (which relates to unlawful dividends and stock repurchases); or

 

•   for transactions from which the director derived an improper personal benefit.

 

The SunCoke Certificate eliminates the personal liability of certain persons, including officers and directors, to SunCoke and its stockholders for monetary damages for breaches of fiduciary duty to the fullest extent permitted by the DGCL.

 

The SunCoke Certificate requires SunCoke to indemnify certain persons, including officers and directors, to the fullest extent permitted by the DGCL, as further delineated in the SunCoke Bylaws.

  

The SXCP Partnership Agreement provides that certain persons, including the SXCP General Partner, managers, managing members, officers, employees, and agents, shall not be liable for monetary damages to SXCP, any Limited Partners, or any other persons who have acquired interests in the Partnership Interests of SXCP, or is otherwise bound by the SXCP Partnership Agreement, for losses sustained or liabilities incurred as a result of any act or omission of any such person unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that, in respect of the matter in question, such person acted in bad faith or, in the case of a criminal matter, acted with knowledge that such person’s conduct was criminal.

 

The SXCP Partnership Agreement indemnifies certain persons, including the SXCP General Partner, managers, managing members, officers, employees, and agents, to the fullest extent permitted by law for any proceedings as a result of such persons acting on behalf of SXCP, subject to certain limitations in the SXCP Partnership Agreement. The SXCP Partnership Agreement also provides for advancement of expenses

 

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The SunCoke Bylaws further provide that the SunCoke Board may grant rights to indemnification and the advancement of expenses to any director, officer, employee or agent of SunCoke. In addition, under the SunCoke Bylaws, SunCoke may maintain insurance, at its own expense, to protect itself and any director, officer, employee or agent of SunCoke or of another entity against any expense, liability or loss, whether or not SunCoke would have the power to indemnify such person against such expense, liability or loss under the DGCL.

 

For further information, see the section titled “Item 20—Indemnification of Officers and Directors of SunCoke” beginning on page II-1 of this joint prospectus/consent statement/proxy statement.

   for proceedings against any such person. Further, the SXCP Partnership Agreement allows SXCP to purchase and maintain insurance on behalf of indemnified persons and any person designated by the SXCP General Partner to protect against any liability incurred by such person on behalf of SXCP.

Fiduciary Duties; Conflicts of Interest

  

SunCoke’s directors owe fiduciary duties to SunCoke and its stockholders.

 

Under the DGCL, no contract or transaction between SunCoke and any of its officers or directors, or between SunCoke and another entity with which any officer or director of SunCoke is an officer or director or in which any officer or director of SunCoke has a financial interest, will be void or voidable solely because the officer or director is present at or participates in the board or committee meeting at which the contract or transaction is authorized, or solely because such officer’s or director’s votes are counted for such purpose, if:

 

•   the material facts as to the officer’s or director’s relationship or interest as to the contract or transaction are disclosed or known to the SunCoke Board (or duly authorized committee thereof) and a majority of the disinterested directors vote to authorize the transaction in good faith, even though such disinterested directors may be less than a quorum;

 

•   the material facts as to the officer’s or director’s relationship or interest and as to the contract or transaction are disclosed or known to SunCoke’s stockholders entitled to vote thereon and the contract or transaction is specifically approved in good faith by a vote of the stockholders; or

 

•   the contract or transaction is fair as to SunCoke as of the time it is authorized, approved, or ratified by the SunCoke Board (or duly authorized committee thereof) or the SunCoke stockholders.

  

The SXCP Partnership Agreement contains provisions that eliminate the SXCP General Partner’s fiduciary duties to SXCP and the SXCP Common Unitholders.

 

The SXCP General Partner may take into account the interests of other parties in addition to SXCP’s interests when resolving conflicts of interest. In effect, these provisions limit the SXCP General Partner’s fiduciary duties to SXCP Common Unitholders. The SXCP Partnership Agreement also restricts the remedies available to the SXCP Common Unitholders for actions taken by the SXCP General Partner that might, without those limitations, constitute breaches of fiduciary duty. Whenever a potential conflict of interest arises between the SXCP General Partner or any of its affiliates, on the one hand, and SXCP, its subsidiaries or any Partner, on the other hand, any resolution or course of action by the SXCP General Partner or its affiliates in respect of such conflict of interest will be conclusively deemed approved by SXCP, all Partners and each person who acquires an interest in a Partnership Interest and each other person who is bound by the SXCP Partnership Agreement, and will not breach the SXCP Partnership Agreement or any duty in law or equity, if such resolution or course of action is:

 

•   approved by a majority of the members of the SXCP Conflicts Committee (as referred to elsewhere in this joint prospectus/consent statement/proxy statement, such approval constituting “Special Approval” under the SXCP Partnership Agreement); or

 

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•   approved by the vote of a majority of the outstanding SXCP Common Units (excluding SXCP Common Units owned by the SXCP General Partner and its affiliates);

   If Special Approval is sought, then it will be presumed that the SXCP Conflicts Committee, in making its decision to approve or reject the resolution or course of action, acted in good faith, unless the SXCP Conflicts Committee believed such determination was adverse to the interests of SXCP.
   Whenever the SXCP General Partner (including the SXCP Board or any committee thereof) makes a determination or takes or declines to take any other action, or any affiliate of the SXCP General Partner causes it to do or not do any of the foregoing, in its individual capacity, unless another express standard is provided for in the SXCP Partnership Agreement, the SXCP General Partner, the SXCP Board, such committee or affiliates causing the SXCP General Partner to do so, shall make such determination or take such action in good faith and shall not be subject to any higher standard contemplated by the SXCP Partnership Agreement or under law.
   For example, whenever the phrase, “at the option of the General Partner” or “in its sole discretion,” or some variation of those phrases, is used in the SXCP Partnership Agreement, it indicates that the SXCP General Partner is acting in its individual capacity. Also, whenever the SXCP General Partner votes or transfers its Partnership Interests or refrains from voting or transferring its Partnership Interests, it is acting in its individual capacity.

Taxation

  
SunCoke is subject to U.S. federal income taxes on its taxable income. Cash distributions to SunCoke Stockholders are taxable to each stockholder as ordinary dividend income to the extent distributed out of SunCoke’s current or accumulated “earnings and profits” (as determined under U.S. federal income tax principles). Cash distributions in excess of SunCoke’s current and accumulated earnings and profits are treated as a non-taxable return of capital, which reduce a stockholder’s adjusted tax basis in such holder’s SunCoke Common Stock and, to the extent the cash distribution exceeds such holder’s adjusted tax basis, as gain from the sale or exchange of such shares.   

SXCP is a flow-through entity for U.S. federal income tax purposes, which means that it is generally not subject to entity-level U.S. federal income taxes.

 

Each SXCP Common Unitholder receives a Schedule K-1 from SXCP reflecting such unitholder’s share of SXCP’s items of income, gain, loss, and deduction for each fiscal year following the end of such fiscal year.

 

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No Appraisal Rights

  
Under the DGCL, stockholders who properly demand and perfect appraisal rights in connection with a merger or consolidation of the corporation may have the right to receive payment of the fair value of their stock in cash as appraised by the Delaware Court of Chancery. Subject to certain exceptions, the DGCL provides that appraisal rights are not available to any class of stock listed on a national securities exchange or held of record by over 2,000 stockholders, unless, in either case, such stockholders are required in the merger to accept in exchange for their shares anything other than (1) shares of the surviving corporation, (2) shares of stock of another corporation which is listed on a national securities exchange or held of record by more than 2,000 holders, (3) cash in lieu of fractional shares of such corporations, or (4) any combination of the above.    Not applicable.
As described elsewhere in this joint prospectus/consent statement/proxy statement, the SunCoke Stockholders will not have appraisal rights in connection with the Merger.   

Dissolution

  
Under the DGCL, SunCoke will dissolve upon any of the following: (i) adoption of a resolution by the SunCoke Board to dissolve, and subsequent approval of such resolution by holders of a majority of SunCoke’s outstanding capital stock entitled to vote on the proposal, or (ii) the unanimous written consent of all stockholders of SunCoke entitled to vote on a proposal to dissolve.    SXCP will dissolve, and its affairs will be wound up, upon: (i) an Event of Withdrawal (as defined in the SXCP Partnership Agreement) of the SXCP General Partner, as provided in the SXCP Partnership Agreement, unless a successor General Partner is admitted to SXCP pursuant to the SXCP Partnership Agreement, (ii) an election to dissolve SXCP by the SXCP General Partner that is approved by the holders of a Unit Majority, (iii) the entry of a decree of judicial dissolution of SXCP pursuant to the provisions of the Delaware Partnership Act, or (iv) there being no Limited Partners, unless SXCP is continued without dissolution in accordance with the Delaware Partnership Act.

 

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DESCRIPTION OF SUNCOKE COMMON STOCK

The following description of the material terms of SunCoke Common Stock is not complete and is qualified in its entirety by reference to (i) the SunCoke Organizational Documents and (ii) the documents incorporated in this joint prospectus/consent statement/proxy statement by reference (to the extent such documents relate to the following description of the material terms of SunCoke Common Stock).

SunCoke Common Stock

As of the date of this joint prospectus/consent statement/proxy statement, SunCoke is authorized to issue up to 300,000,000 shares of SunCoke Common Stock, par value $0.01 per share and up to 50,000,000 shares of Preferred Stock, par value $0.01 per share. As of March 7, 2019 there were 65,094,789 shares of SunCoke Common Stock issued and outstanding and no shares of Preferred Stock issued and outstanding. The outstanding shares of SunCoke Common Stock are fully paid and nonassessable. The SunCoke Stockholders are not entitled to preemptive rights. Shares of SunCoke Common Stock are not convertible into shares of any other class of capital stock. Computershare Trust Company, N.A. (“Computershare”) is the transfer agent and registrar for SunCoke Common Stock. SunCoke Common Stock is listed on the NYSE under the ticker symbol “SXC.”

Dividends

SunCoke Stockholders are entitled to receive, to the extent permitted by law, such dividends as may be declared by the SunCoke Board, out of funds legally available for their payment.

Voting Rights

SunCoke Stockholders are entitled to one vote per share on all matters submitted to a vote of SunCoke Stockholders, and, except as otherwise required by law, vote together as a single class on all matters on which SunCoke Stockholders are entitled to vote. SunCoke Stockholders do not have cumulative voting rights.

Certain Provisions in the SunCoke Organizational Documents

SunCoke currently has the following provisions in the SunCoke Bylaws that may make it more difficult to acquire control of SunCoke or remove its management:

 

   

Only the chairman or a majority of the SunCoke Board may call a special meeting of the stockholders; and

 

   

Stockholders must provide advance notice for nominations of candidates for election as directors to the SunCoke Board or for proposing matters which can be acted upon at stockholders’ meetings.

SunCoke is a Delaware corporation and is subject to Section 203 of the DGCL. In general, Section 203 prevents SunCoke from engaging in any business combination with any interested stockholder, which is defined generally as a person owning 15% or more of SunCoke’s outstanding voting stock, for a period of three years following the date that such stockholder became an interested stockholder, unless:

 

   

before such stockholder became an interested stockholder, the SunCoke Board approved either the business combination or the transaction by which the interested stockholder became an interested stockholder;

 

   

upon completion of the transaction that resulted in such stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of SunCoke’s voting stock outstanding at the time the transaction commenced (excluding, for purposes of determining the voting stock outstanding but not the outstanding voting stock owned by the interested stockholder, stock held by persons who are both directors and officers of SunCoke or by certain employee stock plans); or

 

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on or following the date on which such stockholder became an interested stockholder, the business combination is approved by the SunCoke Board and authorized at a meeting of stockholders, and not by written consent, by the affirmative vote of the holders of at least 66 2/3% of SunCoke’s outstanding voting stock (excluding shares held by the interested stockholder).

A business combination includes mergers, asset sales and other transactions resulting in a financial benefit to the interested stockholder.

Exclusive Forum

The SunCoke Bylaws provide that unless SunCoke consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or other state court located within the State of Delaware or, if no state court located within the State of Delaware has jurisdiction, then the federal district court for the District of Delaware) shall be the sole and exclusive forum for: (i) any derivative action or proceeding brought on behalf of SunCoke, (ii) any action asserting a claim of breach of fiduciary duty owed by any director or officer or other employee of SunCoke to SunCoke or SunCoke’s stockholders, (iii) any action asserting a claim against SunCoke or any director or officer or other employee of SunCoke arising pursuant to any provision of the DGCL, the SunCoke Certificate or the SunCoke Bylaws (as either may be amended from time to time), or (iv) any action asserting a claim against SunCoke or any director or officer or other employee of SunCoke governed by the internal affairs doctrine.    

Limitation of Liability and Indemnification

The DGCL authorizes corporations to limit or eliminate the personal liability of directors to corporations and their stockholders for monetary damages for breaches of directors’ fiduciary duties. However, the DGCL does not permit exculpation for liability:

 

   

for breach of the duty of loyalty;

 

   

for acts or omissions not in good faith or involving intentional misconduct or a knowing violation of law;

 

   

under Section 174 of the DGCL (which relates to unlawful dividends and stock repurchases); or

 

   

for transactions from which the director derived an improper personal benefit.

The SunCoke Certificate eliminates the personal liability of directors to SunCoke or SunCoke’s stockholders for monetary damages for breaches of fiduciary duty as a director to the fullest extent permitted by the DGCL, subject to the foregoing limitations.

The SunCoke Certificate requires SunCoke to indemnify certain persons, including officers and directions, to the fullest extent permitted by the DGCL, as further delineated in the SunCoke Bylaws.

The SunCoke Bylaws further provide that the SunCoke Board may grant rights to indemnification and the advancement of expenses to any director or officer, employee or agent of SunCoke. In addition, under the SunCoke Bylaws, SunCoke may maintain insurance, at its own expense, to protect itself and any director, officer, employee or agent of SunCoke or of another entity against any expense, liability or loss, whether or not SunCoke would have the power to indemnify such person against such expense, liability or loss under the DGCL.

 

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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES

The following is a discussion of certain material U.S. federal income tax consequences to U.S. holders (as defined below) of the Merger and of owning and disposing of SunCoke Common Stock received in the Merger. This discussion is based upon current provisions of the Internal Revenue Code of 1986, as amended (the “Code”), existing and proposed Treasury regulations (the “Treasury Regulations”) promulgated under the Code and current administrative rulings and court decisions, all of which are subject to change, possibly with retroactive effect. Changes in these authorities may cause the tax consequences to vary substantially from the consequences described below. No ruling has been or is expected to be sought from the IRS with respect to any of the tax consequences discussed below. As a result, there can be no assurance that the IRS will not assert, or that a court would not sustain, a position contrary to any of the conclusions set forth below.

This discussion is limited to U.S. holders of SXCP Public Units that hold their SXCP Public Units, and will hold their SunCoke Common Stock received in the Merger, as “capital assets” within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address any tax consequences arising under the net investment income tax or the alternative minimum tax, nor does it address any tax consequences arising under the laws of any state, local, or foreign jurisdiction, or under any U.S. federal laws other than those pertaining to income taxes. Furthermore, this discussion does not address all aspects of U.S. federal income taxation that may be applicable to U.S. holders in light of their particular circumstances or to U.S. holders subject to special treatment under U.S. federal income tax laws, including, without limitation:

 

   

a bank, insurance company, or other financial institution;

 

   

a tax-exempt organization;

 

   

a real estate investment trust;

 

   

an S corporation or other pass-through entity (or an investor in an S corporation or other pass-through entity);