Kirby Corp. is acquiring Penn Maritime Inc. in a $295 million deal that includes a fleet of modern ATBs on the East and Gulf coasts and complements Kirby’s roster of inland tank barge customers.
The cash and stock transaction is expected to close by late-December.
Stamford, Conn.-based Penn operates 18 heated, double-hulled tank barges, with a capacity of 1.9 million bbls. and an average age of 13 years, and 16 tugs that move refinery feedstocks, asphalt and crude oil. Penn Maritime is the largest coastal transporter of heated asphalt products.
Penn’s utilization is in the mid-80-percent range with annual revenue of about $122 million, Kirby officials told analysts Wednesday. The acquisition adds product diversity to the coastal operations of Kirby, the nation’s largest domestic tank barge operator. The two companies serve many of the same oil companies and refiners.
“We believe the transaction is very attractive for Kirby,” Jefferies analyst Douglas Mavrinac said in a note titled “Kirby Strikes Again.” The price makes sense “as we believe the U.S. Jones Act coastal business is in a cyclical recovery due to a combination of improving demand driven in part by domestic crude oil movements and fleet retirements which is improving utilization levels closer to the mid-80-percent range that is needed to generate pricing power.”
Kirby CEO Joe Pyne said Penn “was a healthy company financially. It was prudently run. They could have continued to grow.”
This is the second deal in the last few months that expands Kirby’s coastal business. In September, Kirby announced the $116 million cash purchase of Allied Transportation Co. with its fleet of 10 coastwise tank barges with a liquid capacity of 680,000 bbls., three offshore dry-bulk barges with a capacity of 48,000 dwt, and seven tugs.
Penn acquisition discussions began about a year ago, and Pyne gave assurances that Penn’s fleet is in good shape. “The level of due diligence was significantly more than we were allowed in the K-Sea acquisition, so we don’t anticipate any surprises,” he said. The K-Sea Transportation Partners fleet was in worse shape than anticipated in the $600 million deal last year and cost Kirby money for maintenance and repairs as well as lost revenue days.
Pyne also warned about the “challenging” low-water levels on the Mississippi and Illinois rivers because of the drought, and raised the specter of impassable conditions this winter.
He estimated the light loading and other temporary solutions as well as disruptions from Hurricane Sandy on the East Coast could hurt earnings by 4-5 cents in the fourth quarter.