April 17 (Bloomberg) -- Candover Partners Ltd. and Goldman Sachs Group Inc. agreed to buy Expro International Group Plc, an oilfield equipment maker, for 1.61 billion pounds ($3.2 billion) as rising energy prices spur drilling in harder-to-reach areas.

The buyers will pay 1,435 pence per share, 55 percent more than the price the day before Expro said it was in talks, the companies said in a statement today. Reading, England-based Expro rose 9.3 percent in London trading after saying another bid is possible.

Takeovers of companies that make drilling equipment or provide services for energy companies are off to the second busiest year in five, with $45 billion of deals announced, according to data compiled by Bloomberg. Crude's 82 percent gain in the past year has made drilling fields on the seabed more viable as companies such as BP Plc and Royal Dutch Shell Plc step up exploration to replace aging oil and gas fields.

``It's a very dear price, but you've got huge potential,'' said Peter Hitchens, an analyst with Seymour Pierce in London, who has a ``buy'' recommendation on Expro. ``They are the market leader and private equity is realizing how much cash these guys are going to produce.''

The company makes equipment used to test offshore oil wells drilled in waters deeper than 1,000 meters (3,281 feet). Expro's revenue has more than doubled in the past five years, according to data compiled by Bloomberg. Expro rose 123 pence to 1,445 pence in London today.

Energy M&A Boom

Buyout firms are targeting smaller investments as the cost of the loans used to finance deals surged following the U.S. subprime mortgage crisis. The takeover is the biggest leveraged buyout in Europe this year, topping the 1.2 billion-pound takeover of landfill operator Biffa Plc by a group led by Montagu Private Equity LLP in February.

Buyout firms are increasingly targeting oilfield services. First Reserve Corp., the biggest firm focused on the energy industry, acquired Scottish drilling-services provider Abbot Group Plc last year. In all, oil and gas acquisitions have climbed about 40 percent in the past four years to $275.4 billion, according to Bloomberg data.

Expro's buyers include Goldman's private-equity fund and AlpInvest Partners NV, a Dutch investor in Candover's private- equity funds. Candover and Goldman will own about 40 percent each, with AlpInvest holding the remainder.

Candover, run by managing partner Colin Buffin, has profited from investment in the oil and gas industry before. The London-based company was part of a group of buyout firms that bought ABB Ltd.'s oil and gas business for $925 million in 2004.

Investment Gains

They sold part of the business, renamed Vetco Gray Inc., to General Electric Co. for $1.9 billion in January last year. Six months later, the Candover group sold the remainder to Norwary's Ferd Private Equity for $900 million. In all, Candover reaped a profit of more than four times its $123 million investment.

Candover also netted more than six times its investment in Wellstream, a maker of oil pipelines it acquired from Halliburton Co. in 2003. Officials at Candover were unavailable for comment. The firm is holding a meeting with investors today.

The buyers are getting loans from five banks to fund today's takeover: Royal Bank of Scotland Group Plc, Lloyds TSB Group Plc, Royal Bank of Canada, HSBC Holdings Plc and DnB NOR Bank ASA are arranging about 1 billion pounds of loans.

Buyout firms use a combination of their own funds and debt secured on the targets they acquire to pay for takeovers. The firms typically seek to expand those companies or improve performance before selling them within five years to other funds or to investors through stock offerings.

JPMorgan Cazenove advised Expro and Goldman advised the buyers, according to today's statement.

``A number of parties were given the same access to management and due diligence as the consortium,'' the companies said in the statement. ``One of those parties continues to conduct due diligence on Expro. There can be no certainty that a formal offer will ultimately be forthcoming from this party.''

To contact the reporter on this story: Bill Murray in London at wmurray1@bloomberg.net; Edward Evans in London at eevans3@bloomberg.net

Last Updated: April 17, 2008 11:45 EDT