Monday, February 5, 2018

Kirby to acquire Higman (Updated)

(My apologies for earlier problems with the formatting of this entry when it was first posted).

It looks like another round of consolidation is underway among cargo carriers on the inland waterways system. A few weeks ago, Hines Furlong Line Inc. announced it had acquired the inland marine transportation operation of Hunter Marine Transport Inc. Yesterday, Kirby Corp. announced it will acquire Higman Marine.

Kirby boats are a frequent sight on the Ohio River, and in recent months we’ve been seeing Higman boats as far up as Huntington, also.

The M/V Higman Leader passed Huntington, W.Va., northbound on the Ohio River on Jan. 22.

This is from the text of Kirby’s news release issued Sunday:

Kirby Corporation ("Kirby") (NYSE: KEX) today announced the signing of a definitive agreement to acquire Higman Marine, Inc. and its affiliated companies ("Higman"), for approximately $419 million in cash, subject to certain closing adjustments. The purchase will be financed through additional borrowings.

Higman's marine transportation fleet consists of 159 inland tank barges with 4.8 million barrels of capacity, and 75 inland towboats. Higman's fleet moves petrochemicals, refined petroleum products, crude oil, natural gas condensate, and black oil on the Mississippi River System and Gulf Intracoastal Waterway for large midstream and global integrated oil companies. The closing of the acquisition is expected to occur in the first quarter and is subject to customary closing conditions.

David Grzebinski, Kirby's President and Chief Executive Officer, commented, "The acquisition of Higman and its young fleet of well-maintained inland tank barges and towboats is an excellent fit with Kirby's operations. Higman's inland fleet of 30,000 barrel tank barges, approximately 80% of which are clean and 20% heated black oil vessels, has an average age of seven years, and is one of the younger fleets in the industry. With an average age of eight years, the addition of Higman's towboats to Kirby's horsepower profile will allow us to avoid significant future capital outlays for new towboats.” ...

Mr. Grzebinski concluded, "Overall, as the inland market begins its recovery, the timing of the Higman acquisition is ideal as it will further upgrade our fleet and ultimately allow Kirby to emerge from the downturn larger, more efficient, and better able to serve our customers. As the cycle improves, and we realize the benefits of integration efficiencies and synergies, this acquisition will improve the earnings potential for Kirby in the future."

Here are bullet points from a conference call Grzebinski had with investment analysts this morning describing the advantages to Kirby for the acquisition:

• Increased scale in core inland marine business

• Expands business and relationships with existing customers

• New capacity and flexibility to better serve customers

• Young, high-quality and well-maintained fleet

• Ability to retain high-quality Higman personnel

• Attractive time in cycle to acquire assets

• Opportunities for cost synergies

• Accretive to earnings as market recovers although first year will likely be neutral

• Immediate retirement of 15 inactive tank barges representing 450,000 barrels of capacity.

According to the presentation materials, Higman is headquartered in Houston. It was founded in 1917 and is a leading provider of inland marine tank barge and logistics solutions The company transports refined petroleum products, crude oil, condensates, black oil products, chemicals and petrochemicals. The average age of its towboat fleet is eight years. Its customer base includes a diverse, blue-chip set of companies.

I didn’t get to listen to the conference call, but I hope to do so this evening. Additional material could be posted here at that time.

Kirby is based in Houston. In its investment materials and news releases, Kirby describes itself as “the nation's largest domestic tank barge operator transporting bulk liquid products throughout the Mississippi River System, on the Gulf Intracoastal Waterway, coastwise along all three United States coasts, and in Alaska and Hawaii. Kirby transports petrochemicals, black oil, refined petroleum products and agricultural chemicals by tank barge. In addition, Kirby participates in the transportation of dry-bulk commodities in United States coastwise trade. Through the distribution and services segment, Kirby provides after-market service and parts for engines, transmissions, reduction gears, and related equipment used in oilfield services, marine, power generation, on-highway, and other industrial applications. Kirby also rents equipment including generators, forklifts, pumps, and compressors for use in a variety of industrial markets, and manufactures and remanufactures oilfield service equipment, including pressure pumping units, for land-based oilfield service customers.”

# # #

Oh well. Kirby apparently had its conference call, but there is no archived webcast on the Kirby site. Also, I have yet to find a news article describing the contents of the call, at least one that's not behind a paywall, so we're out of luck there,  too.

However, in my searches I did find something that will make a good blog entry in a day or two, so stay tuned.