Private Equity funds To Buy Israeli Companies Gadot Chemical Tankers And John Deere Water

Gadot Chemical Tankers and Terminals

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Many private equity funds and other parties are casting their eyes at the tenders for the sale of two big companies, each of which has an annual turnover of several hundred million dollars. The companies are Gadot Chemical Tankers and Terminals Ltd., which has been put up for sale by Israel Discount Bank (TASE: DSCT), in order to recover the loan the bank gave Ampal-American Israel Corporation (Bulletin Board: AMPLQ; TASE:AMPL) to acquire the company; and John Deere Water, half of which is Kibbutz Gvat‘s Plastro Irrigation Systems, which was acquired in 2007.

The value of the deals at both companies is estimated at tens of millions of dollars. The amount of the proceeds is relatively low, because Gadot has a large financial debt, and John Deere Water has heavy losses.

A review by “Globes” found that the companies interested in Gadot Chemical Tankers include FIMI Opportunity Funds (FIMI), founded and run by Ishay Davidi; a group of investors led by Zvi Yochman’s Sky Fund; Emilia Development (OFG) Ltd. (TASE:EMDV), controlled by Oded Feller (the owner of Chemovil, which is in the same business as Gadot); and Tene Investment Funds Ltd., which tried to acquire Gadot in 2013. Tene Capital may now submit a joint bid with Cartesian Capital Group LLC, which was also previously interested in acquiring the company.

A foreign consortium, comprising companies operating in the Benelux, where Gadot also has operations, has expressed an interest, but it is not yet clear whether it will submit an offer to the company’s receivers. Gadot’s former CEO, Erez Meltzer, may join one of the bidders.

As for John Deere Water, FIMI is also in the picture, along with Fortissimo Capital, run by Yuval Cohen. Another party interested in the company, and which may submit a bid, is a company owned by California-based private equity fund Paine & Partners, which specializes the acquisition of food and agrochemicals companies. In 2002, Paine & Partners (formerly Fox Paine & Company) acquired Israel’s Paradigm Geophysical Ltd., which develops underground 3D imaging software for the oil and gas industry, for $100 million. The private equity fund posted a handsome exit on this investment, when it sold the company to Apax Partners and JMI Equity for $1 billion in 2012.

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Heading overseas to examine assets

Gadot Chemical Tankers and Terminals, founded in 1958, operates through Israeli and foreign subsidiaries. Half of its revenue comes from exports. In 2007-08, Ampal, then controlled by Yosef Maiman, acquired the company at a value of NIS 550 million from Moshe Johananoff. Ampal took a loan from Discount Bank to finance the deal, using Gadot shares as collateral. When liquidation proceedings were initiated against Ampal in 2013, the bank foreclosed on the lien and a receiver was appointed for the company to oversee the sale of the shares. The balance of the loan is estimated at $70 million.

Several months ago, Gadot won a $80 million arbitration case against a Chinese shipyard, which opened the way for the sale of the company. Gadot’s current turnover is estimated at $500 million, and its operating profit at $30-40 million. It is highly leveraged, with an estimated financial debt of $180 million.

Potential buyers have been conducting due diligence on Gadot in the past few weeks, including a trip to the Benelux to examine its assets in these countries. The deadline for bids is Thursday, January 23.

Gadot’s receivers, who are being advised by Ernst & Young, are seeking to sell the company for at least $70 million, the balance of Ampal’s debt to Discount Bank. However, this is an ambitious target. Only if the sale is made at a higher price, will the balance of the proceeds go to Ampal’s bondholders, which are owed NIS 900 million as a result of the company’s collapse.

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Plastro to change hands again

Deere & Company (NYSE: DE) has put up for sale John Deere Water, which it established in 2006. The subsidiary was founded as part of the company’s strategy to expand its global agricultural operations to change its specialization from the manufacture of tractors and peripherals to a global provider of integrated agricultural solutions. Immediately following its founding, John Deere Water embarked on a shopping spree, which included the acquisitions of T-Systems International Inc., a relatively small US provider of water sources location and management systems; and Roberts Irrigation Products Inc. The largest acquisition was Plastro Irrigation Systems for NIS 380 million from Kibbutz Gvat and Australian billionaire John Gandel in 2007.

Deere & Company’s vision failed to materialize, and John Deere Water’s annual turnover is estimated at $250 million, half of which is by John Deere Water Israel (Plastro). The main problem of the company, which has operations worldwide, is its annual loss, estimated at $40 million. As a consequence, Deere & Company decided in September 2013 to sell its water business, and hired Merrill Lynch as an adviser. The sale will reportedly take place within a few weeks.

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Published by Globes [online], Israel business news – www.globes-online.com