Kirby to buy K-Sea in tank barge merger
Two of the nation’s largest tank barge companies have agreed to merge.
Kirby Corp., a Houston-based company that is the largest operator of inland tank barges, said it has agreed to acquire K-Sea Transportation Partners L.P., an operator of barges in the coastal trades, in a deal worth about $600 million.
Kirby will pay $335 million for K-Sea’s equity and refinance $265 million of K-Sea debt. K-Sea’s common and preferred unit holders will receive $8.15 per unit in consideration in the form of cash and Kirby common stock. That’s a 26 percent premium over K-Sea’s closing price of $6.47 on Friday.
Kirby’s operates 825 tank barges with 15.9 million barrels of capacity, and 241 active towing vessels on the Gulf Intercoastal Waterway, Mississippi and other inland rivers. It had revenue of $1.1 billion in 2010, 82 percent of which comes from its marine transportation business; the other 18 percent comes from a business servicing diesel engines.
K-Sea, headquartered in East Brunswick, N.J., operates 58 tank barges with a capacity of 3.8 million barrels, and 63 tugboats along the U.S. East, West and Gulf coasts, as well as in Alaska and Hawaii. K-Sea’s tank barge fleet, 54 of which are doubled-hulled, is one of the youngest fleets in the coastwise trade with an average age of about nine years. K-Sea’s customers include major oil companies and refiners, many of which are current Kirby customers for inland tank barge services.
The company’s hope to complete the deal in June or July.
Joe Pyne, Kirby’s chief executive officer, said K-Sea would be “a terrific complement to Kirby’s existing inland tank barge transportation service. With one of the youngest and largest fleets in its sector, K-Sea stands to benefit from the retirement of older tank barges in the coastwise trade, so we believe that the timing of this transaction is very favorable.”
K-Sea would operate as an independent subsidiary within Kirby and K-Sea’s management team, led by CEO Tim Casey would join Kirby.
Pyne said K-Sea’s revenue would be in the $240 million to $280 million this year and that Kirby expected “the positive earnings impact from K-Sea on our 2011 results will be offset by one-time transaction fees.”
But in 2012, he said, “we expect a positive contribution to earnings from K-Sea’s operations.”