KRG Capital Partners has acquired a control position in Universal Ensco Inc. and Pegasus International Inc., providers of engineering and project management solutions related to the onshore and offshore oil and gas industry.
No equity terms were disclosed, but the deal did include a $225 million senior credit facility from RBS Greenwich Capital (lead), BMO Capital Markets, CIT Group and FirstLight Financial Corp. It also included $71 million in mezzanine financing co-led by Lehman Brothers Global Mezzanine Partners and PennantPark Investment Corp.
KRG Capital Partners (KRG), a Denver-based private equity firm, announced that it has completed a control investment in Universal Ensco, Inc. (Universal) and Pegasus International, Inc. (Pegasus) (combined, the Company). Universal is a leading provider of engineering, project management, survey, and inspection services related to onshore gas, oil and liquid product transportation systems. Pegasus is also a rapidly growing provider of engineering and project management services to the oil and gas industry with a focus on subsea and offshore projects in both domestic (Gulf of Mexico) and international markets. The Universal and Pegasus acquisitions represent the 10th platform company for KRG's $715 million Fund III and the 31st platform since KRG's inception. Management of both Universal and Pegasus will continue to be significant owners in the combined entity.
Despite the challenging credit environment, the $225 million senior credit facility that supports the transaction was over-subscribed with no flex to the original terms. The transaction received strong support from KRG's longstanding relationship lenders including agents RBS Greenwich Capital (lead), BMO Capital Markets, CIT Group and FirstLight Financial Corporation. The $71 million subordinated debt was led by Lehman Brothers Global Mezzanine Partners and PennantPark Investment Corporation. “Over the last 12 years, KRG has built strong relationships with leading lenders that has enabled us to complete transactions during difficult financing markets. Our strategy of treating lenders well in good times or bad enables KRG to differentiate itself from other buyers by greatly increasing the certainty of close,” observed Charlie Gwirtsman, Co-Founder and Managing Director of KRG. “In addition to the tremendous organic growth opportunities, we have recognized several potential acquisition candidates in the international and North America oil and gas engineering and project management space that would be highly complementary to the Company's current service offering and believe KRG can leverage its lending relationships and significant equity to position the Company as the partner of choice for key acquisition candidates.”
“Our objective is to build a unique, world-class company that provides its clients with a broad range of engineering and project management services related to both the onshore and offshore collection, transmission and processing of hydrocarbons and hydrocarbon-based products,” noted Chuck Hamilton, Managing Director of KRG.
Founded in 1966, Universal employs over 1,200 personnel and has completed over 3,500 pipeline projects for hundreds of clients in the oil and gas industry throughout North America as well as in China, the Middle East, the former Soviet Union, South America and Africa. Headquartered in Houston, Universal has locations in Tulsa, OK; West Monroe, LA; South Bend, IN; and Ankara, Turkey.
Jerry Mayfield, Universal President, stated, “We look forward to partnering with Pegasus as both companies operate with the primary goal of providing our customers with the highest quality work product. The combined resources will allow the Company to perform larger and more complex projects for our customers both in North America and internationally.”
Pegasus has over 550 employees and has completed projects in over 50 countries including the Gulf of Mexico, North Sea, West Africa, Middle East and South East Asia regions. Headquartered in Houston, Pegasus has locations in Lafayette, LA; Salt Lake City, UT; London and Manchester, England; and Aberdeen, Scotland.
“The combination of Pegasus' offshore capabilities with Universal's leading onshore position will enable the combined entity to service our customers' needs in ways not previously possible. In addition, KRG's capital support will enable us to increase our recruiting efforts to support our international growth strategy and service our customers as they expand geographically,” stated Felipe Gonzalez, Pegasus President.
KRG's investment in Universal and Pegasus represents a compelling opportunity to participate in the growing oil and gas engineering industry. KRG plans to grow the Company both organically and through strategic acquisitions both in North America and internationally. Jerry Mayfield will remain President of Universal and will manage the combined onshore business unit while Felipe Gonzalez will remain President of Pegasus and will manage the combined offshore business unit.
Universal was represented in the transaction by Simmons & Company International while Pegasus was represented by Parks Paton Hoepfl & Brown. Tudor, Pickering, Holt & Co. and Spears & Associates, Inc. advised KRG during its diligence.
Founded in 1996, KRG is a Denver-based private equity firm with nearly $4 billion of cumulative capital either deployed or available for future investment, which includes approximately $675 million deployed on behalf of equity co-investors. KRG specializes in acquiring and recapitalizing unique and profitable middle-market companies. The firm seeks investment opportunities where KRG can partner with owners and operating managers that 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 31 platform companies and has completed 94 add-on acquisitions for those platforms. More information on KRG is available online at www.krgcapital.com.