2011-01-11-2011-01-05-2011-01-05

Transaction Type
Sellers
Buyers
Announce Date
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Description

Formed JV to focus on on services in the deepwater and ultra-deepwater oil and gas industry, including engineering, design and manufacturing deepwater buoyancy systems.

Deep Down Inc., Houston, (OTCBB: DPDW) has entered a new joint venture‚ Cuming Flotation Technologies LLC, with Cuming Corp., an affiliate of Denver-based investment-fund group York Capital Management LLC.

The new venture will focus on services in the deepwater and ultra-deepwater oil and gas industry, including engineering, design and manufacturing deepwater buoyancy systems using syntactic foams and polyurethane elastomers.

Deep Down contributed the assets and liabilities of its subsidiary Flotation Technologies Inc. into the new entity Flotation Tech LLC plus $1.4 million in cash to the joint venture in exchange for a 20% equity interest‚ and York contributed $22.35 million in cash in exchange for an 80% interest.

The cash will be used to partially fund the acquisition of Cuming 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. Deep Down issued 20 million common shares to York at $0.07 per share. This wasoffset by the return of 18 million shares of common stock previously issued in connection with the Cuming acquisition.

Deep Down has entered two agreements with Cuming Flotation Technologies: Deep Down will provide certain technical‚ administrative and management services to the venture on a cost reimbursable basis, an a sales and service agreement will provide a platform for Deep Down‚ Cuming and Flotec to combine their product and service offerings.

Deep Down will use the equity method of accounting to recognize its proportionate share of the earnings of the joint venture.

Deep Down chief executive Ron Smith says, "We believe York will make a strong partner that is supportive of our objective of creating a global leader in syntactic foam products and services primarily for the offshore oil and gas markets. 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."

FBR Capital Markets was exclusive financial advisor to Deep Down.