Houston, Texas -- Oilfield services company Deep Down Inc. said 17 Aug 2010 that its deal to buy syntactic foam parts maker Cuming Corp. for $37 million is still in progress, and it is trying to arrange suitable financing,
But the acquisition, announced 3 May 2010, was not completed by the 31 July deadline set earlier. Deep Down said the closing date has not been extended again: "However, neither party has terminated the agreement."
The company plans to finance the acquisition with a combination of debt and equity and is actively engaged in negotiating terms with several financial institutions and private equity firms. Nevertheless, consummation of the transaction remains subject to several conditions including Deep Down's obtaining adequate external financing to fund the approximately $34 million cash component of the purchase price.
Deep Down says that Cuming Corp., set up in 1980, is a leading manufacturer of buoyancy and insulation products with a wide range of deepwater oil and gas industry applications.
"Cuming's operations are highly complementary with those of Deep Down's Flotation Technologies subsidiary, which produces syntactic foam products for customers in the oil and gas, defence, scientific and industrial sectors," the company's half year results statement said.
If the deal is completed, Deep Down said it expects to acquire 100 percent of Cuming's stock. The $37 million purchase price will be paid as a combination of cash and shares of Deep Down, with the latter assuming about $13 million of net liabilities based upon Cuming's balance sheet at 31 Dec 2009.
Meanwhile Deep Down reported half-year revenues which rose 55 percent to $9.6 million and gross profit which rose 93 percent to $3.6 million, while earnings (EBITDA) turned positive to $724 000. And the group noted some higher demand following the BP oil spill in the Gulf of Mexico, as companies pay close attention to safety.
The revenue increase was due "primarily to increased revenues from the production of products for deepwater projects" and for ROVs (remotely operated underwater vehicles) and related services. Deep Down also said that in the second quarter 2010, its flotation plant ran at over 30 percentage points greater capacity for the production of buoyancy products compared to the same quarter last year.
Higher demand for ROV and related services in Q2 2010 was "primarily from customers commencing work that had previously been delayed, projects supporting relief efforts and work related to the increased emphasis on inspection and safety as a result of the oil spill in the US Gulf of Mexico,'" the company added.
PIC: Buoyancy products from Deep Down unit Flotation Technologies: its products and Cuming's are complementary.
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