Mexichem, S.A.B. de C.V. (BMV:MEXCHEM) (“The Company” or “Mexichem”) announced today that it has reached a definitive agreement to acquire an 80% stake in Netafim, Ltd. (“Netafim”), an Israeli private company, from a company backed by the Permira Funds and other minority shareholders. Kibbutz Hatzerim, the founder, will retain the remaining 20% stake of Netafim’s share capital. The total enterprise value of the transaction is US$1.895 billion.
Netafim is the world’s largest irrigation company. In the past few years it has achieved strong financial performance, with top line growth and improving profitability, reaching total sales of US$855 million for the year ended December 31, 2016. Mexichem will fund the acquisition with a combination of cash and debt.
“This is a transformational acquisition that advances Mexichem’s drive into specialty products and solutions and establishes us as a leading innovator in the high growth, micro-irrigation market. At the same time, Netafim positions us to become a leading developer of solutions to address food and water shortages, and respond to the need of increase crop yields and meet higher sustainability standards for fertilization.
“Netafim has a long history of being at the forefront of creating smart solutions for the irrigation market. This acquisition will give Mexichem access to this smart technology which can be applied to heating and cooling, water management, Datacom, and other sectors, providing a platform from which to create smart industrial solutions around our existing product lines that serve the infrastructure, housing and Datacom markets,” said Antonio Carrillo Rule, Mexichem’s Chief Executive Officer.
Based in Tel Aviv, Israel, Netafim is a global leader in developing, manufacturing and distributing advanced drip and micro-irrigation solutions, with local presence in more than 30 countries, 17 manufacturing plants, more than 4,300 employees and sales in more than 110 countries worldwide.
Netafim’s advanced technologies and end-to-end solutions help growers across the world achieve higher and better crop yields while reducing usage of water and other inputs, such as manpower, nutrients and crop protection.
“By combining our current irrigation portfolio with Netafim’s business, we will create a formidable growth platform to drive synergies. With sales of almost $1 billion in the aggregate, this new business unit will have access to the resources, sales channels, and customer base of Mexichem’s global business.
“Additionally, we expect to leverage Netafim’s resources and expertise to create innovative new solutions across Mexichem’s specialty products. We also see substantial operating efficiencies over time in raw material procurement, logistics, and the sharing of production processes and technology know-how,” continued Mr Carrillo.
Commenting on the acquisition, Ran Maidan, Netafim’s Chief Executive Officer noted, “We are proud to have won the trust of a leading company such as Mexichem, and believe that together we will have an improved cost position and broader portfolio to support continued profitable growth and to extend our reach to new customers and geographies. We also will be able to apply our R&D and technical expertise in developing end-to-end innovative solutions that Mexichem can offer to its industrial customer base.”
Concluding, Mr. Carrillo said, “This acquisition strengthens Mexichem’s investment thesis by significantly broadening our portfolio of specialty products, diversifying and expanding our end-markets and broadening our geographic footprint.”
Torsten Vogt, a Permira Partner and Co-Head of Industrials, commented, “Netafim is an outstanding business and we are proud to have supported the company’s growth and its critical mission of conserving and protecting water resources.
“Over the course of our partnership with Netafim’s management, Kibbutz Hatzerim and Kibbutz Magal, the company was transformed into a best-in-class global leader, with an enhanced focus on innovation and new product development, and an expanded footprint and resources. It has been a pleasure working with the Netafim team and we wish them continued success as part of Mexichem.”
The transaction is subject to approval by Mexichem’s shareholders meeting and regulatory approvals and is expected to close during the fourth quarter of 2017. Once the transaction is completed, Mexichem will consolidate Netafim under its Fluent Business Group for accounting purposes. Netafim will continue to operate under its current management and with its existing brand portfolio.
Mexichem will host a conference call to discuss the transaction on Monday August 7th, 2017 at 7:30 a.m. Mexico City / 8:30 a.m. NY. To access the call, please dial 001-855-817-7630 (Mexico), or 1-888-349-0106 (United States) or 1-412-902-0131 (International). All callers should dial in a minimum of 15 minutes prior to the start time and ask for the Mexichem conference call.
The call will also be available through live webcast. A replay of the call will be available approximately two hours after the end of the call. The replay can be accessed via Mexichem’s website website.
J.P. Morgan acted as financial advisor to Mexichem in the transaction.