Houston, Texas -- Deepwater oilfield services company Deep Down Inc. has announced the formation of a joint venture, Cuming Flotation Technologies, with an affiliate of York Capital Management.
The agreement combines the operations of Cuming Corp. and Deep Down's Flotation Technologies subsidiary.
Under the joint venture agreement with York, Deep Down contributed the assets and liabilities of Flotation Technologies Inc. into a new entity, Flotation Tech llc plus $1.4 million in cash to the joint venture in exchange for 20 percent equity interest, and York contributed $22.35 million in cash in exchange for 80 percent interest.
Deep Down has been negotiating the purchase of Cuming, which manufactures syntactic foam flotation products and insulation materials for the offshore oil and gas industry, since May 2010, when it first announced its intention to acquire the operation.
The cash contributions will be used to partially fund the acquisition of Cuming Corp. by the joint venture, with York providing a bridge loan to fund the balance of the $42 million purchase price and to provide working capital.
Houston, Texas-based Deep Down is an oilfield services company specialising in products and services for the deepwater and ultra-deepwater oil and gas industry.
Deep Down's ceo, Ron Smith, commented in a 5 Jan statement: "This joint venture allows Deep Down and its shareholders to participate in the benefits of combining our flotation technologies business with Cuming Corp., without the dilutive impact of financing the acquisition through the issuance of a large amount of equity.
"The benefits of combining these manufacturing operations, as well as the additional opportunities stemming from the other agreements, will create significant value for our shareholders."
Avon, Massachusetts-headquartered Cuming has about 250 employees, supplying C-FLOAT buoyancy products, used to support both drilling and production risers in deepwater operations.
Deep Down said it expects the joint venture to generate more than $100 million of revenues in the year 2011. LMH