Saltchuk Resources said it will acquire Tropical Shipping, a company that operates ships between the U.S. and Canada and the islands in the Caribbean and Bahamas, from AGL Resources, an Atlanta-based natural gas utility holding company.
AGL Resources did not say what the sale price was, but said, "after-tax cash proceeds and repatriated cash from the transaction are
expected to be approximately $220 million, subject to certain defined
Saltchuk is the parent company of several other transportation companies, including the U.S.-flag carriers Sea Star Line, which moves freight between the U.S. mainland and Puerto Rico; and Totem Ocean Trailer Express, which operates between Tacoma, Wash., and Anchorage, Alaska.
AGL acquired Tropical as part of its 2011 acquisition of the Illinois-based natural gas utility NICOR.
AGL said in its annual report that Tropical regularly operates 11 owned vessels and three chartered vessels with a container capacity totaling approximately 6,750 TEUs. The owned vessels range in age from three-to-37 years, and vary in length from 260 to 525 feet. In addition to the vessels, it noted it owns and leases containers, cargo-handling equipment, chassis and other equipment.
Tropical's fleet includes smaller vessels capable of calling small ports on Caribbean Islands. They range in size from ships capable of carrying around 200 TEUs to the Berra K,
a pure container ship with capacity for 1,131 TEUs.
Tropical provides southbound scheduled services from the U.S. and Canada to 25 ports in the Bahamas and the Caribbean, and inter-island service between several of the Caribbean ports. It operates from St. Thomas and St. Croix, its hubs in the Caribbean. In addition, it provides northbound shipments from those islands to the U.S. and Canada. Other related services, such as inland transportation and cargo insurance, are also provided by Tropical Shipping or its other subsidiaries and affiliates.
AGL said approximately 70 to 75 percent of Tropical Shipping’s total volumes shipped are in the southbound market; 15 to 20 percent inter-island; and 5 to 10 percent northbound.
Tropical has a wholly owned domestic cargo insurance company called Seven Seas, and two-thirds of the insurance company's business comes from Tropical customers. It also has an equity investment in Triton, a cargo container leasing business, which AGL said is not included in the sale.
Tropical said it has five main competitors that serve the same major transportation areas.
AGL said that in 2013, Tropical's volumes shipped increased, but that its profitability on those volumes continued to be adversely affected by competitive shipping rates.
"Tropical Shipping’s operating results are cyclical and very much aligned with the level of global gross domestic product, tourism and the cost of fuel. Overall, the economies of the Bahamas and the Virgin Islands are highly dependent on tourism from the U.S., and the Caribbean’s Windward and Leeward islands' economies primarily depend on tourism from Europe. Fuel price volatility also impacts our earnings. Bunker surcharge rates are charged to customers and are used to mitigate the fluctuations in fuel transportation costs. In 2014, we expect similar general market challenges as those experienced in 2013 with respect to overall levels of competition and related impacts on shipping volumes and rate pressure."
In its 2013 annual report, AGL disclosed that, "In the third quarter of 2013, we commenced an investigation into payments to local officials and related persons at one of the foreign ports serviced by Tropical Shipping. While the investigation is ongoing, we believe that a number of payments were made over a series of years and the aggregate amount of these payments is less than $200,000 based upon information obtained to date. In October 2013, we voluntarily disclosed these matters to the U.S. Department of Justice and the SEC. We will cooperate with any investigation by the DOJ or the SEC. We presently are unable to predict the duration, scope or result of this investigation or of any governmental investigation."
The sale is expected to close within the next 90 days.
Other Saltchuk business include Foss, a coastal and harbor tug and barge company; Interstate Distributor Co., a national, full-truckload operation; North Star Petroleum, an independent petroleum marketer and distributor; and Northern Aviation Services, which includes Northern Air Cargo and Aloha Air Cargo.