Kirby's (KEX) Seacor Deal Is Solid Value - Wells Fargo

Wells Fargo analyst, Michael Webber, published a note detailing the value of Kirby Corporation's (NYSE: KEX) Seacor deal. In short, its a nice deal but not a game changer. No change to Market Perform rating.

KEX will acquire 28 of SEACOR’s inland barges, which consists of 27 on-the-water 30KB tank barges, plus one 30KB tank barge newbuild. The existing barge fleet is comprised of 23 petroleum product/chemical barges and 4 black oil/asphalt barges, which typically carry a premium. He values this fleet at roughly $58M.

KEX will also acquire SEACOR’s 13 inland towboats, and 1 towboat newbuild, which he values at roughly $44M enbloc.

KEX will transfer to SEACOR the ownership of one Florida-based tugboat (to support SEACOR’s US Gulf inter-coastal waterway operations), which we put a ballpark value on at $6M.

KEX will fund the transaction using its revolving credit facility (KEX had $5.9M in cash on-hand as of 12/31 - prior to the transaction KEX had approximately $300M in undrawn funds on its $500M revolving credit facility). Transaction set to close in Q216 (customary conditions/regulatory approvals).

Contracts are attached to 50% of the assets, with an average remaining duration of just under 1 year (likely inline with market levels). KEX is nearing completion of its own organic growth program, having guided to $220-240MM of CAPEX in 2016 ($122-144M for capital upgrades to existing equipment as well as $95MM across four Articulated Tug Barges), down from $343M in 2015. At least 4 of the tugs are likely to be scrapped (built in the ‘40s or ‘50s, refurbished between 2004-2009) but the deal should supplement that growth profile.

Not A Game Changer, But Nice. Theu believe the SEACOR fleet is valued at roughly $102M - after deducting $6M for the towboat KEX is giving to SEACOR as consideration – resulting in a fair market transactional value of $96M, which translates to an 8% discount for KEX. Based on our assumptions, we expect the acquisition to add ~2.7% ($0.08/share) of incremental EPS on an annualized basis to their 2016 estimate of $3.19, providing modest accretion assuming the transaction.

For an analyst ratings summary and ratings history on Kirby Corporation click here. For more ratings news on Kirby Corporation click here.

Shares of Kirby Corporation closed at $57.78 yesterday.

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