Drip irrigation, jewel of Israeli tech, sells for $1.5b

Published: AUGUST 7, 2017 11:31

Updated: AUGUST 8, 2017 05:54

Netafim (photo credit: COURTESY NETAFIM) — Netafim

(photo credit: COURTESY NETAFIM)

As part of the deal, the parties said they have agreed to maintain Netafim's core activity in Israel, including continued production and R&D activity, for at least the next 20 years.

The Mexican petrochemicals giant Mexichem will be purchasing 80% of the Israeli irrigation company Netafim for about $1.5 billion, the firms announced on Monday.

Under the deal, Mexichem will acquire all the shares of Netafim held by the Permira Fund and Kibbutz Magal and a portion of those held by Kibbutz Hatzerim – which was the birthplace of the Israeli company and its revolutionary drip irrigation technologies.

The 80% acquisition deal, worth $1.516b., values Netafim at $1.895b.

As part of the deal, the parties said they have agreed to maintain Netafim’s core activity in Israel, including continued production and R&D activity, for at least the next 20 years. While completion of the transaction is subject to the receipt of approvals as required by the law, the process is expected to be completed by the fourth quarter of 2017, the companies said.

“This is a strategic acquisition that strengthens Mexichem’s unique product portfolio and solutions,” said Antonio Carrillo Rule, CEO of Mexichem. “The synergy between the companies will enable us to strengthen Netafim’s position as a leading and innovative company in the rapidly growing smart irrigation market.

The Permira Fund, which acquired control of Netafim in 2011, currently holds 61% of the company, while Kibbutz Magal has a 6% share. In addition to gaining all of these assets, Mexichem will be taking on an approximately 13% chunk from Kibbutz Hatzerim, which today has a 33% share of the firm.

“Netafim has a long history of innovation and technological leadership in the field of irrigation, and the acquisition will give Mexichem access to this advanced technology, which will eventually serve as a basis for ‘smart’ solutions in other industrial sectors,” Carrillo said.

Founded in the Negev Desert’s Kibbutz Hatzerim in 1965, Netafim has grown to become one of the world’s leading companies in the smart irrigation sector. The company operates 17 manufacturing plants worldwide and works in more than 30 countries, and its products are sold in more than 100 companies, a statement from the firm said.

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In recent years, Netafim has experienced considerable growth in sales and profitability, with a turnover of about $855 million in 2016, the statement added.

“We looked for a strategic partner for Netafim that would enable us to continue developing the company and to execute the next leap forward,” said Netafim president and CEO Ran Maidan. “We are proud to win the trust of a leading company like Mexichem and believe that, together, we can ensure the continued growth and prosperity of Netafim.

“The terms of the agreement guarantee Netafim’s continued Israeli character, with a commitment to preserving the company’s center of operations in Israel for many years to come,” Maidan added.