Kirby Corp. signed an asset purchase agreement with Coastal Towing, Inc. to purchase from Coastal seven black oil tank barges and 13 inland towboats.
The transaction, estimated at $17.1 million in cash, is being financed through Kirby's operating cash flow and available credit under Kirby's bank revolving credit agreement. Kirby and Coastal have also entered into a Barge Management Agreement whereby Kirby will serve as manager of the combined black oil tank barge fleet, which will include Coastal's 51 remaining barges and Kirby's 65 barges, for a period of seven years. In a related transaction, on September 25, 2002, Kirby purchased from Coastal three black oil tank barges for $1.8 million in cash. Coastal is engaged in the inland tank barge transportation of black oil products along the Gulf Intracoastal Waterway and the Mississippi River. The ten tank barges purchased by Kirby and the 51 tank barges to be managed constitute all of Coastal's active tank barge fleet.
Transported black oil products include products such as asphalt, No. 6 fuel oil, coker feed, vacuum gas oil, crude oil and ship bunkers (ship engine fuel). Black oil products volumes represent approximately 10% of Kirby's marine transportation segment's revenue. The remaining 90 percent of marine transportation revenue historically consists of approximately 60 percent petrochemical volumes, 20 percent refined petroleum products volumes and 10 percent agricultural chemical volumes. Black oil customers include refining companies, marketers and end users that require the transportation of black oil products between
refineries and storage terminals. Ship bunkers customers are oil companies and oil traders in the bunkering business. The closing of the transaction is expected in the 2002 fourth quarter and is subject to certain conditions, including the inspection of the barges and towboats being purchased, approval by both the Kirby and Coastal boards of directors, and Coastal's lenders. "Kirby and Coastal have been in previous discussions concerning the merits of putting Kirby's and Coastal's black oil fleets together," said Joe Pyne, Kirby's President and CEO. "Under this arrangement, we will be able to more efficiently operate the fleet and fully assess the long-term maintenance and replacement needs of Coastal's fleet. We have made provisions for a buy/sell agreement in the Barge Management Agreement.
As the barge operator of the combined fleet, we believe Kirby will be the likely buyer. We believe the asset purchase and Barge Maintenance Agreement will be marginally accretive to Kirby as we will be able to reduce costs in the combined fleet.
We expect to hire the majority of Coastal's vessel employees."