June 26, 2007
K-Sea to acquire Smith and Sirius
K-Sea Transportation Partners L.P. (NYSE: KSP) is to acquire Smith Maritime, Ltd. of Honolulu, Hawaii and Sirius Maritime LLC of Seattle, Washington ("Sirius").
Smith is controlled by Gordon Smith, who is also one of the three owners of Sirius and who will join the management of K-Sea. The total purchase price will be approximately $205 million.
The transactions are expected to be completed in July or early August.
On a combined basis, these operations include eleven petroleum tank barges and ten tugboats, aggregating 777,000 barrels of capacity, of which 670,000 barrels, or 86 percent, are double-hulled. The addition of these tank barges will represent a 22 percent increase in the barrel-carrying capacity of the K-Sea fleet to about 4.3 million barrels.
The total purchase price will consist of approximately $195 million in cash and assumed debt, plus K-Sea common units valued at approximately $10 million. K-Sea expects to initially finance the cash portion of the purchase price through additional borrowings, which it expects to refinance in due course.
K-Sea also announced that its management will recommend an increase of $0.02 per unit, or 2.9%, in the distribution to unitholders for the fourth quarter ending June 30, 2007, to $0.70 per unit, or $2.80 per unit annualized. This will be the ninth consecutive quarter of increased distributions, and the eleventh such increase since the company's IPO in January 2004.
K-Sea also took delivery last week of another new, 28,000 barrel double hulled tank barge, which is part of its fleet expansion and upgrade program. Including the recently announced extension of this program, ten more double hulled tank barges, totaling 524,000 barrels of additional capacity, are scheduled to be delivered before the end of calendar 2010, at which time K-Sea's total barrel-carrying capacity of over 4.8 million barrels will have more than doubled from its capacity at the time of its initial public offering in January 2004.
By the end of 2010, the K-Sea fleet should be more than 80% double hulled, depending on the rate of retirement of the remaining single hulled vessels.
Gordon Smith, President of Smith Maritime, stated, "We are excited to become part of the K-Sea Transportation Partners L.P. group of companies. Throughout the years Smith Maritime has endeavored to become the leading tank barge operator in the Hawaiian Islands, greatly enhancing our fleet with new double hull barges, as well as working to become one of the safest and most reliable transporters of petroleum products in the U.S. We believe that merging with K-Sea will bring greater opportunities for both our loyal employees as well as our customers in our continued growth and expansion."
Robert Dorn and Wayne Sundberg of Sirius Maritime jointly stated, "We are very pleased to become part of K-Sea Transportation Partners L.P., a company whose business and culture closely resembles our own. We are excited about the opportunities that this transaction provides to our employees and to our customers, and look forward to continuing to strive for safe and efficient marine transportation of petroleum products while working in the K-Sea family of companies."
Timothy J. Casey, President and CEO of K-Sea, said, "We look forward to welcoming Gordon Smith, Bob Dorn and Wayne Sundberg, along with the other employees of Smith and Sirius, to our company. Together, we look forward to continuing to build a high quality marine transportation operation. The management of Smith and Sirius have built impressive operating teams which will significantly increase our growth potential."