Mexican chemical firm Mexichem is acquiring control of the Israeli company Netafim, the world’s biggest manufacturer of drip irrigation systems,
at a value of $ 1.895 billion, financial website Calcalist reported on Monday.
Mexichem will acquire the entire holding of the Permira Fund (61.3%) and the total holdings of Kibbutz Magal (6%). Kibbutz Hatzerim, which currently holds 32.7% of Netafim, will probably sell 12.7% of the company.
Overall Mexichem will pay $ 1.516 billion for 80% of the company. According to the agreement, which is expected to be signed today, the Mexicans pledge to keep Netafim’s activity in Israel for 20 years.
The move come as surprise, since last week Tamasek – a fund owned by the Singapore government – was considered a leader in the Permira Fund tender. The Singapore fund expressed its willingness to acquire control of the company at a company value of $ 1.75 billion, but at the final extension of the tender, the Mexican company offered an amount that was also higher than the expectations of Premira. The value offered by Mexichem reflects a multiple of 14 on Netafim’s operating-cash flow (EBITDA), while the maximum multiples in the industry are about 13.
The Mexicans are strategic buyers, and they apparently agreed to pay a significant premium for the synergy between the two companies. Mexichem is one of the largest pipe manufacturers and plastic connectors in the world, while Netafim is considered a world leader in the drip irrigation market.
The Permira Fund will receive $ 1.162 billion for its share in the company, which it acquired in 2011 for $ 518 million. Framira manages over $ 20 billion in 30 countries and is considered a fund that acquires leading companies, improves them and then sells them.
Kibbutz Hatzerim will probably sell 12.7% of the company for $ 241 million. The kibbutz members agreed on the sale of part of the company’s holdings, and at the meeting that began on Tuesday and ended yesterday, the tendency was to stay with 20% of the shares. The presence of members of Kibbutz Hatzerim on Netafim’s board of directors will probably be reduced.
Another option for members of Kibbutz Hatzerim was to remain with 25% of the company. Eli Ben Simon, Zvika Barkai and Arnon Columbus were the kibbutz representatives in negotiations in London, led by investment banks Goldman Sachs, Merrill Lynch and Bank of America. Kibbutz Magal is also making a handsome exit, selling its holdings in the company for $114 million.
Eli Ben Simon and Zvika Barkai of Kibbutz Hatzerim told Calcalist: “The process of locating our new partners has taken many months and we are happy to have a successful conclusion.
“Kibbutz Hatserim has always served as a leading partner in Netafim, and sees itself in the company for the distant future as well,” Calcalist was told. “Kibbutz Hatzerim promised to preserve the Israeli character of the company and maintaining its operational and management center in Israel for many years, while maintaining the welfare of its employees in Israel and around the world.
“Netafim’s valuation and the terms of the transaction demonstrate the success of Hatzerim’s business strategy and the successful management of the property along with our partners over the past 50 years.” Hatzerim intends to use the transaction money to strengthen and expand the kibbutz’s business portfolio and preserve its future and future members.”
Founded more than 50 years ago, Netafim employs approximately 4,500 workers in 17 plants around the world, including 1,000 employees in three plants in Israel. The company’s current CEO is Ran Meidan.
2017 is expected to be a record year for Netafim’s operations, which is expected to show EBITDA of $ 135 million and a $ 1 billion turnover. This compares to operating income of $ 115 million and a turnover of $ 875 million in 2016. The company has a debt of only $ 100 million, so that it may attempt to charge the company additional debt as part of the financing financing plan.
Netafim’s sale process began last December and was exposed by Calcalist.