RIYADH, 14 December 2007 — Arcapita Bank B.S.C., a Bahrain-based international investment firm consisting of Saudi investors, among others, has completed the acquisition of Varel International Ind., L.P. — the fastest growing manufacturer of drill bits for the oil and gas industry — along with its affiliates, for a deal worth $401.4 million.
It is the second such move on the part of Gulf companies to invest in the fast-expanding oil industry, the Bahrain-based company said in a statement early this week.
Recently, Makamin, the newly established SR1.2 billion oil and gas service company from Saudi Arabia, unveiled its plans to go into oil exploration and drilling, besides undertaking the manufacture of equipment and spare parts required by the sector.
Varel International manufactures high-performance polycrystalline diamond compact and roller cone drill bits for the oil, gas and mining industries. It invests heavily to maintain technological advantage, and currently has 38 patents which are either registered or pending. This has given it a competitive edge in the market, as reserves become more difficult to reach, requiring more complex horizontal and directional drilling.
With headquarters in Texas, the company has 1,100 employees operating in 22 countries, allowing Varel to deliver prompt and efficient service to a diversified customer base consisting of the world’s leading oil and mining companies throughout the world, it said.
Atif A. Abdulmalik, CEO of Arcapita, said: “Earlier this year, we achieved a very profitable exit from our investment in Roxar, another company operating upstream in the oil and gas industry. We believe that Varel has similar potential to penetrate the $3 billion oil and gas drill bit market. Since 2004, the company has been growing at over 40 percent annually. The management team has completed strategically important human and capital investments to allow the company to maintain this trajectory.”
Charlie Ogburn, head of corporate investments for Arcapita, said Varel’s sustained performance record is being attained in an industry that is experiencing high growth rates, driven particularly by growing demand for energy and mineral products that are being mined from deeper and more inaccessible reserves. “Drill bit malfunctions and maintenance are expensive occurrences, so customers are naturally very demanding over the quality and reliability of their drill bit suppliers.”
“Varel’s vigorous implementation of lean manufacturing, the geographic coverage of its operations and its dedication to ongoing technical research leave the company well placed for continued growth. We also believe that we will be able to successfully leverage our resources in the GCC to assist Varel in accelerating market penetration within this important region”.
Together with the recent acquisition of Profine in Germany, Arcapita has now completed over $1.4 billion of investments within the last two months.
