Philly Inc: For Sunoco, an 'everything must go' deal at last
It took three years, eight months, and 22 days for Sunoco Inc.’s leadership to complete a 180-degree strategy turn.
It took three years, eight months, and 22 days for Sunoco Inc.'s leadership to complete a 180-degree strategy turn.
So Monday's announcement that a Texas pipeline operator with the exciting brand name of Energy Transfer Partners L.P. would acquire Philadelphia's Sunoco for $5.3 billion was not unexpected. In fact, with Sunoco's annual shareholders meeting being held in the buyer's home state of Texas on Thursday, maybe it should've been blindingly obvious that Sunoco's final deal was near.
The handwriting was not only on the wall, but also had been all over the APlus convenience stores, crude-oil storage tanks, pipelines, and refinery stacks since former CEO Lynn L. Elsenhanswalked into Sunoco's headquarters on Aug. 8, 2008:
Everything must go.
Not that the board of directors that hired Elsenhans said as much when she was hired. In fact, in the statement announcing her as the new CEO, Jack Ratcliffe, then chair of the board's governance committee, said: "We are confident that Lynn will further develop the strategy we have followed for the last decade."
That strategy had been to diversify Sunoco's often-volatile fuel-driven earnings by expanding into more steady businesses: oil pipelines and terminals; metallurgical coke production, and chemicals.
Well, two out of three ain't bad. Elsenhans did expend a lot of capital bulking up the Sunoco Logistics Partners network. Arguably, it is why Energy Transfer Partners is willing to pay billions for Sunoco now.
Though the sale is occurring under Brian P. MacDonald, who was hired as chief financial officer in August 2009 and has been CEO only since March 1, there should be no doubt that it was launched during the Elsenhans era.
Era is probably the wrong word, given long periods of leadership by members of the Pew family during the 126-year history of Sun Oil. Founder Joseph Newton Pew ran the company from its 1886 founding until 1912, when he was succeeded by his son, J. Howard Pew, who spent 70 years in management or on the board, including 35 years as president.
Oil created a vast fortune for the Pews, who ran a sprawling corporate empire from Philadelphia. The first of seven Pew Charitable Trusts was established in 1948. The assets of the Philadelphia-based nonprofit totaled $4.8 billion at the end of June, but Sunoco common stock hasn't been one of those assets since 1997, when the trusts sold the last of their shares.
R. Anderson Pew was the last Pew family member to serve on Sunoco's board. He left it in 2009, having reached 72, the company's mandatory-retirement age for directors.
The Pew Charitable Trusts remain a national force in a way Sunoco hasn't been for many years. As a corporate citizen, Sunoco was often quiet about its donations, with the exception of a 15-year run as the title sponsor of the Welcome America festival, the city's Fourth of July celebration. That sponsorship ended in 2010, when the Wawa convenience-store chain replaced it.
The company's Sunoco Foundation spread its charitable dollars within the communities where Sunoco maintained a presence. In 2010, the foundation donated more than $2.6 million to groups including City Year and Philabundance. In 2008, it pledged $1 million for the Salvation Army Kroc Center of Philadelphia; in 2006, it was among the corporate philanthropies that donated money to move the Barnes Foundation to Benjamin Franklin Parkway.
While Sunoco and Energy Transfer Partners are saying all the right things about continuing to have a "key presence" in the Philadelphia region, the buyer is based in Dallas, and time will tell what that commitment will entail.
In giving up its independence now, Sunoco becomes the latest in a long line of Philadelphia companies that have chosen to sell out to competitors: Conrail, John Wanamaker, Pennwalt, Rohm & Haas, banks such as Provident National, CoreStates, and Commerce.
Welcome America, indeed.
Contact Mike Armstrong at 215-854-2980 or firstname.lastname@example.org, or @PhillyInc on Twitter. Read his blog, "PhillyInc," at www.phillyinc.biz.