Mexichem agrees $1.5bn acquisition of PE-backed Netafim

October 2017 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

October 2017 Issue

Mexican chemical firm Mexichem has agreed to buy an 80 percent stake in Israeli irrigation firm Netafim from shareholders led by Permira, the private equity firm that owns 61 percent of Netafim, for $1.5bn. The deal values the company at $1.89bn.

The transaction is subject to approval by Mexichem’s shareholders, as well as meeting the customary regulatory approvals and is expected to close during the fourth quarter of 2017.

Netafim has a global presence, selling its products in 110 countries, including China and India. The company has manufacturing plants all over the world and employs around 4300 people. Netafim, which has a market value of $6bn, has developed an irrigation system that cuts water use by as much as three quarters while ensuring that crops get the water they need. The company announced in March that it was interested in selling itself and hired Goldman Sachs to manage a possible sale.

Mexichem, by comparison, manufactures a range of products, from petrochemicals to plastic pipes and operates in 120 production plants in over 30 countries. The company also owns two fluorite mines. Mexichem has annual sales of $5.4bn.

In a statement announcing the deal, Netafim said Mexichem had committed to keeping the company’s activity in Israel, including its production and research and development facilities, for at least 20 years. Kibbutz Hatzerim, the agricultural community where the company was founded in 1965, will sell down part of its stake but will retain a minority 20 percent holding. The company had sales of around $855m in 2016.

“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, chief executive of Mexichem.

Ran Maidan, Netafim’s chief executive, 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.”

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.”

Mexichem is a manufacturer of products and solutions for a variety of industrial sectors, from petrochemical to construction, infrastructure, agriculture, healthcare, transportation, telecom and energy. It is one of the biggest producers of plastic pipes and connections worldwide and one of the largest chemical and petrochemical companies in Latin America.

Richard Summerfield