Delaware Court of Chancery Appoints Rigrodsky & Long, P.A. Co-Lead Counsel in K-Sea Transportation Partners, L.P. Shareholders Litigation

Rigrodsky & Long, P.A. Appointed Co-Lead Counsel by Delaware Court of Chancery in K-Sea Transportation Partners, L.P. Shareholders Litigation

On April 13, 2011, Vice Chancellor Donald F. Parsons of the Delaware Court of Chancery appointed Rigrodsky & Long, P.A. Co-Lead Counsel in In re K-Sea Transportation Partners, L.P. S’holders Litig., Consol. C.A. No. 6301-VCP (Del. Ch.).

Plaintiffs brought this class action lawsuit on behalf of themselves and all other public limited partner unitholders of K-Sea Transportation Partners L.P. (“K-Sea” or the “Company”) against the Company; its general partner K-Sea General Partner L.P. (“K-Sea GP”); K-Sea IDR Holdings LLC (“K-Sea IDR”), a wholly-owned subsidiary of K-Sea GP; K-Sea GP’s general partner, K-Sea General Partner GP LLC (“KSGP”); and the members of the Board of Directors of KSGP (the “Board,” “Directors,” or “Individual Defendants”) to enjoin the proposed transaction announced on March 13, 2011 (the “Proposed Transaction” or “Merger”), pursuant to which Kirby Corporation and its wholly-owned subsidiaries KSP Holding Sub, LLC, KSP LP Sub, LLC, and KSP Merger Sub, LLC (the various Kirby entities collectively, “Kirby”) will acquire all outstanding units of K-Sea.  The deal is expected to close in June or July, 2011.

On or about March 13, 2011, the Individual Defendants caused K-Sea, K-Sea GP, K-Sea IDR, and KSGP to enter into an agreement and plan of merger (the “Merger Agreement”) under which Kirby will acquire:  (i) each outstanding K-Sea common unit for, at the election of the unitholder, either (a) $8.15 in cash or (b) $4.075 in cash and 0.0734 of a share of Kirby’s common stock; (ii) each outstanding K-Sea preferred unit for $4.075 in cash and 0.0734 of a share of Kirby’s common stock; and (iii) each outstanding K-Sea general partner unit for $8.15 in cash.  The “Incentive Distribution Rights” (“IDR”) held by K-Sea GP through K-Sea IDR will be converted into the right to receive $18 million.  The aggregate amount of the Proposed Transaction is estimated to be approximately $600 million, consisting of $335 million for K-Sea’s equity and the refinancing of $265 million of K-Sea’s debt.

The Proposed Transaction is troubling for a number of reasons.  The press release announcing the Proposed Transaction stated that “[t]he K-Sea management team will continue to run the day-to-day operations of the coastwise tank barge business after completion of the transaction.”  Kirby entered into “Support Agreements” with KA First Reserve, LLC (“KAFR”), EW Transportation LLC, EW Transportation Corp., and EW Holding Corp. (the EW entities, collectively, “EWT”).  Under the Support Agreements, KAFR and EWT have pledged to vote their units in favor of the Proposed Transaction and against any competing proposal.  KAFR owns approximately 19,178,120 of K-Sea’s Series A Preferred Units, or 50% of its common units on an as-converted basis.  EWT owns 3,790,000 K-Sea common units, or approximately 9.9% of the Company’s outstanding common units.  As a result, the Individual Defendants assured unitholder approval of the Proposed Transaction on the day it was announced by obtaining voting commitments from nearly 60% of the holders of the Company’s outstanding common units.

In approving the Proposed Transaction, the Individual Defendants breached their fiduciary duty of loyalty to K-Sea’s unitholders by, inter alia:  (i) agreeing to sell K-Sea without first taking steps to ensure that plaintiff and the Class members (defined below) will obtain adequate, fair, and maximum consideration for their K-Sea units under the circumstances; (ii) failing to conduct an appropriate sales process; (iii) implementing preclusive deal protections that will inhibit an alternate transaction; and (ii) engineering the Proposed Transaction to benefit themselves without regard for plaintiff and the Class.

Rigrodsky & Long, P.A., with offices in Wilmington, Delaware and Garden City, New York, regularly litigates securities class, derivative and direct actions, shareholder rights litigation and corporate governance litigation, including claims for breach of fiduciary duty and proxy violations in the Delaware Court of Chancery and in state and federal courts throughout the United States.