K Sea (NYSE:KSP)
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K-Sea Transportation Partners L.P. (NYSE: KSP) announced today that it
has agreed to acquire Smith Maritime, Ltd. of Honolulu, Hawaii (“Smith”)
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, subject to customary closing
conditions, and are expected to be immediately accretive to K-Sea’s
distributable cash flow.
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%, are double-hulled. The addition of these
tank barges will represent a 22% 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 the Company’s
initial public offering in January 2004. By the end of calendar 2010,
the Company’s fleet should be more than 80%
double hulled, depending on the rate of retirement of the remaining
single hulled vessels.
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.
“This expansion further increases our
barrel-carrying capacity which, we believe, strengthens our position as
a provider of refined petroleum products transportation services in the
U.S. and enhances our ability to provide safe, reliable, and efficient
service to our customers. In addition to expanding service to existing
customers, the acquisition of Smith and Sirius also brings new customers
into K-Sea’s coverage. In light of our growth
and expectations for continued development, our management, as indicated
above, will recommend that our Board of Directors approve a two cent per
unit increase in our quarterly distribution in respect of the quarter
ending June 30. We look forward to integrating the Smith and Sirius
operations into K-Sea and are optimistic about continuing our growth
into the future.”
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.”
About K-Sea Transportation Partners
K-Sea Transportation Partners provides refined petroleum products marine
transportation, distribution and logistics services in the U.S. domestic
marine transportation business, and its Master Limited Partnership Units
trade on the New York Stock Exchange under the symbol KSP. For
additional information about K-Sea Transportation Partners L.P., please
visit K-Sea’s website, including the Investor
Relations section, at www.k-sea.com.
Cautionary Statements
This press release contains forward looking statements, which include
any statements that are not historical facts, such as the Company’s
expectations regarding the closing of the Smith and Sirius transaction
and the benefits to be derived therefrom, the timing of placing the
acquired vessels in service, expected accretion, the timing of delivery
of tank barges currently under construction, and the percentage of the
Company’s fleet which will be double-hulled
by the end of calendar 2010. These statements involve risks and
uncertainties, including, but not limited to, satisfaction of conditions
to the closing of the acquisitions, insufficient cash from operations, a
decline in demand for refined petroleum products, a decline in demand
for tank vessel capacity, intense competition in the domestic tank barge
industry, the occurrence of marine accidents or other hazards, the loss
of any of the Company’s largest customers,
fluctuations in charter rates, delays or cost overruns in the
construction of new vessels, failure to comply with the Jones Act,
modification or elimination of the Jones Act and adverse developments in
the marine transportation business and other factors detailed in the
Company’s filings with the Securities and
Exchange Commission. If one or more of these risks or uncertainties
materialize (or the consequences of such a development change), or
should underlying assumptions prove incorrect, actual outcomes may vary
materially from those forecasted or expected. The Company disclaims any
intention or obligation to update publicly or revise such statements,
whether as a result of new information, future events or otherwise.