Hercules Offshore has entered into an Asset Purchase Agreement with Seahawk Drilling and its affiliates (collectively "Seahawk") to purchase 20 rigs and related assets from Seahawk for approximately 22.3 million shares of Hercules Offshore common stock and cash consideration of $25 million, which will be used primarily to pay off Seahawk's Debtor-in-Possession ("DIP") loan, which Seahawk has secured in connection with its bankruptcy filing to support the business and provide liquidity prior to the closing of the transaction. The amount of Hercules Offshore common shares issued will be proportionally reduced at closing, based on a fixed price of $3.36 per share, if the outstanding amount of the DIP loan exceeds $25 million, with the total cash consideration not to exceed $45 million. The assets to be acquired will consist of 20 jackup rigs located in the U.S. Gulf of Mexico and related equipment, accounts receivable, cash and contractual rights. Assumed liabilities will be limited to specific items, such as accounts payable, with all other liabilities retained by Seahawk.
John T. Rynd, President and Chief Executive Officer of Hercules Offshore, Inc., stated, "We believe that the strategic rationale and value proposition of this transaction are very compelling for our shareholders. This is a unique opportunity to acquire assets at an attractive price, and we expect significant synergies once they are added to our rig fleet. Furthermore, the structure and terms by which we are acquiring these assets will provide benefits to our shareholders, allowing us to fully dedicate our time to operate these assets to their maximum potential. We will have the ability to operate a significantly larger fleet of rigs for our customers, with a small amount of incremental cost."
The Board of Directors of Hercules Offshore has approved the transaction. Closing of the transaction is subject to bankruptcy court approval, Hercules Offshore lender approval, as well as regulatory approvals and other customary conditions. Assuming such conditions are achieved, we anticipate closing of this transaction to occur during the second quarter of 2011. Jefferies & Company provided a fairness opinion to the Hercules Offshore Board of Directors, and Andrews Kurth LLP and Thompson & Knight LLP acted as legal advisers to Hercules Offshore for this transaction.
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