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Kirby Corporation has announced that it has entered into an agreement to acquire K-Sea Transportation Partners L.P., an operator of tank barges and tugboats involved in the transportation of refined petroleum products.

The total value of the transaction is approximately $600 million, which will be financed through a combination of available cash, borrowing under Kirby’s revolving credit facility, a new bank term loan of up to $540 million and the issuance of Kirby common stock.

The closing of the transaction is expected to take place in June or July 2011 and is subject to certain conditions, including approval by K-Sea’s unitholders and the expiration of the required waiting period under the Hart-Scott-Rodino Act. The holders of a majority of the outstanding K-Sea units, which is a sufficient number of units to approve the merger, have entered into support agreements with Kirby pursuant to which they have agreed to vote their units in favor of the merger.

The $600 million transaction value consists of $335 million for K-Sea’s equity and the refinancing of $265 million of K-Sea debt. K-Sea’s common and preferred unitholders will receive $8.15 per unit in consideration in the form of cash and Kirby common stock.

K-Sea’s fleet comprises of 58 tank barges with a capacity of 3.8 million barrels and 63 tugboats. The vessels operate along the East Coast, West Coast and Gulf Coast of the United States, as well as in Alaska and Hawaii.

K-Sea’s tank barge fleet, 54 of which are double hulled, has an average age of approximately nine years and is one of the youngest fleets in the coastwise trade. K-Sea’s customers include major oil companies and refiners, many of which are current Kirby customers for inland tank barge services, Kirby said.

Commenting on the acquisition, Joe Pyne, Kirby’s Chief Executive Officer, commented, “We are very pleased to announce our agreement with K-Sea subject to their unitholders’ approval. K-Sea is uniquely well positioned within the U.S. coastwise tank barge business, and will be a terrific complement to Kirby’s existing inland tank barge transportation service. With one of the youngest and largest fleets in its sector, K-Sea stands to benefit from the retirement of older tank barges in the coastwise trade, so we believe that the timing of this transaction is very favorable. K-Sea is a great foundation from which to expand our liquid transportation business into the U.S. Jones Act coastwise trade and better serve our customers. K-Sea has a very strong management team led by Tim Casey, great customer relationships, and a good operating reputation in the industry. The Kirby management team looks forward to working with Tim Casey and his management team as we continue to grow Kirby and enhance our shareholders’ value.”

Pyne added: “We expect the positive earnings impact from K-Sea on our 2011 results will be offset by one-time transaction fees of approximately $.05 per share. Accordingly, our guidance for 2011 remains in the $2.55 to $2.80 per share range. Projected full calendar year 2011 revenues for K-Sea are anticipated to be in the $240 to $280 million range. Assuming a closing in July, anticipated revenues for Kirby from K-Sea’s operations would be in the $130 to $150 million range. For 2012, we expect a positive contribution to earnings from K-Sea’s operations.”