KRG Capital

June 07, 2005 06:00 ET

Varel International Acquired by KRG Capital Partners; World's Largest Independent and Fastest Growing Drill Bit Manufacturer is Funded and Focused for Continued Growth

DALLAS--(CCNMatthews - Jun 7, 2005) -

Varel International, the world's largest independent supplier of drill bits for the oil & gas and mining/industrial industries, announced today that KRG Capital Partners (KRG) has acquired the Company. KRG is a Denver-based private equity firm that specializes in a "buy and build" and consolidations for middle market companies. The Varel transaction was financed with equity from the $450 million KRG Capital Fund II in conjunction with debt provided by Royal Bank of Scotland (Agent), Freeport Financial and Ares Capital Management and marks the 20th platform investment for KRG. Simmons & Company International acted as financial advisor on behalf of Varel. KRG will enhance the Company's ability to deliver outstanding value to its customers and to continue to expand market share.

"KRG has an excellent track record of transitioning middle market companies striving to the 'next level,'" said Jim Nixon, President and CEO of Varel International. "With KRG's support we will be able to continue our position as one of the fastest growing drill bit manufacturers in the world. Our new partner will allow us to remain committed to investment in new projects and equipment, while continuing to deliver high-performance products to our customers in the global oil & gas and mining/industrial drilling industries. We are honored to be a part of this new team and are committed to continuing to deliver the highest quality and value to our customers, employees and shareholders."

Following KRG's investment, Varel's world headquarters will remain in Carrollton, Texas, a suburb of Dallas. Manufacturing facilities in Carrollton and Matamoros, Mexico will continue to support the roller cone products manufactured for the global oil & gas and mining/industrial industries. Additionally, fixed cutter drill bit manufacturing facilities in Houston and Tarbes, France, and the creation of new sales offices in emerging regions, will support Varel's global marketing and sales objectives for the oil & gas industry.

"Varel's products, technology, and market position, coupled with strong oil & gas and mining fundamentals, make Varel a unique and attractive acquisition," said Chuck Hamilton, Managing Director of KRG Capital Partners, who will serve as Chairman of Varel International. "Through organic growth from existing customers, development of new products and select strategic acquisitions, we believe Varel will be able to increase market share while broadening its customer base and product offering. We believe that the combination of our strategic and acquisition experience, in addition to our ability to provide the necessary capital, will allow Varel to continue its rapid growth trajectory."

A "Bit" of a Success Story

Founded in 1947, Varel was privately held by the Varel family for more than 50 years. At the time, the Company was primarily a U.S.-supplier of roller cone bits for the oil & gas and mining/industrial industries servicing limited markets primarily in North America. In 1998, a new leadership team, spearheaded by Jim Nixon and supported by two institutional investors, purchased the Company from the Varel family.

Under the new management team, Varel expanded and grew its capabilities and product offering for both the global oil & gas and mining/industrial industries, tripling its revenues in less than six years. The Company's customer-centric focus allowed it to grow by enhancing and expanding engineering and manufacturing capabilities, adding a fixed cutter product offering, and focusing on delivering value to its customers. Additionally, Varel focused on rapidly growing international opportunities and built a significant worldwide sales and engineering support network while implementing a uniform marketing and communications strategy. As a result, today approximately half of Varel's revenues are generated outside of North America.

"The culmination of these actions resulted in Varel's stellar growth," said Nixon. "Through our commitment to delivering value and providing high-performance products to the markets we serve, Varel has become the world's fifth largest drill bit provider to the oil & gas industry, with a growing share of both the roller cone and fixed cutter markets. Varel is also the third largest supplier of drill bits the global mining industry. KRG's investment will support our continued growth."

Varel International: The Next Generation

With KRG's financial and strategic support, Varel will continue its customer-centric focus on drill bit innovation, engineering support and geographic coverage. Through expenditures in cutting edge manufacturing equipment & facilities, systems and human capital, Varel will accelerate its market share expansion in the rapidly growing niches it serves.

About KRG Capital

Founded in 1996, KRG is a Denver-based private equity firm that currently manages more than $1.7 billion of committed equity capital and equity co-investments. KRG specializes in acquiring and recapitalizing unique and profitable middle-market companies. The firm seeks investment opportunities for its partners where KRG can work in concert with owners and operating managers who are committed to expanding their companies and becoming industry leaders. The result is a partnership that focuses on creating a significantly larger enterprise through a combination of internal growth and complementary add-on acquisitions. Since inception, KRG has invested in 20 "platform companies" and has completed 59 add-on acquisitions for those platforms. For more information about KRG Capital Partners, please visit

About Varel International

Founded in 1947, Varel International is the world's largest independent supplier and the fifth largest company operating in the $1.6 billion global drill bit market. Headquartered in Carrollton, Texas, Varel services oil & gas, mining, and industrial markets with its comprehensive suite of roller cone and fixed cutter drill bits. The Company employs 1,000 and has manufacturing facilities in Carrollton, Texas; Houston, Texas; Matamoros, Mexico and Tarbes France, as well as sales offices throughout the world. Varel's proprietary design capabilities, low cost manufacturing, and global sales force uniquely positions the Company to provide high-quality drill bits that deliver reliable performance at an attractive price to its customer base. For more information about Varel International, please visit

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