The acquisition of Allied Transportation Co.’s assets expands inland tank barge heavyweight Kirby Corp.’s presence in the coastwise trade.
With the $116 million cash deal announced in early September and expected to close later this year, Kirby gets the Norfolk, Va., operator’s 10 coastwise tank barges with a total liquid capacity of 680,000 bbls., three offshore dry-bulk barges with a total capacity of 48,000 dwt, and seven offshore tugboats.
Kirby entered the coastal offshore market in July 2011 with the $600 million purchase of K-Sea Transportation Partners (now Kirby Offshore Marine) and its fleet of 58 tank barges and 63 tugs. In December, Kirby announced the $42.3 million purchase of the coastwise tank barge fleet of Seaboats Inc., which consisted of three 80,000-bbl. tank barge and tug units that currently operate along the East Coast.
Houston-based Kirby is now the biggest player in a market where “Allied was roughly the 10th largest operator,” Stifel Nicolaus analyst John Larkin said in a note.
The acquisition “increases Kirby’s share of the coastal tank barge business from about 21 percent to roughly 25 percent, which should result in more industry pricing discipline as the market improves over the next couple of years, similar to what has occurred in the inland barge business,” said Jefferies analyst Douglas Mavrinac.
Eighty percent of Allied’s business is petrochemicals, the rest is sugar and other dry products, Kirby CEO Joe Pyne said in discussing the transaction. Customers of privately held Allied, which operates along the Northeast, Atlantic and Gulf coasts, include major petrochemical companies that Kirby also serves inland.
The deal has other benefits in addition to shared clients.
“With 90 percent of Allied’s petrochemical business under multiyear contracts, there are no issues with excess capacity that are currently present in the K-Sea segment,” Larkin said.
The New York market has too much equipment competing for existing volumes, so Kirby has moved four tank barges and two tugs from the Northeast to the Gulf Coast market.
Pyne also assured that Allied’s fleet was in much better shape than K-Sea’s, which cost Kirby money for maintenance and repair as well as lost revenue days.
“We have thoroughly vetted this equipment which we’re buying and are comfortable it’s well maintained,” he said. Kirby had several months to look over Allied’s equipment but only 10 days to examine K-Sea’s.
Kirby also is buying 17 inland tank barges operated by Lyondell Chemical Co., which Kirby was managing. There may be more acquisitions ahead.
“We think that our balance sheet positions us to continue to consolidate the businesses that we’re in,” Pyne said.