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News
August 07, 2017 02:00 AM

Mexichem buying majority stake in world's largest drip irrigation company

Stephen Downer
Plastics News Correspondent
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    Netafim Ltd.
    Netafim Ltd.'s drip irrigation system in place in a farm field.

    Tlalnepantla, Mexico — Mexican pipe and PVC resin producer Mexichem SAB de CV has agreed to acquire 80 percent of Israeli irrigation giant Netafim Ltd.

    The all-cash deal, which Mexichem expects to complete before the end of the year, is worth $1.895 billion.

    Kibbutz Hatzerim co-founded Netafim in 1965. It will retain 20 percent of Netafim's share capital, Mexichem said in an Aug. 7 news release. Netafim is the world's largest drip irrigation company.

    Permira, a London-based private equity firm, owns 61 percent of Netafim. It bought the company in 2011. Mexichem is buying its 80 percent stake in Netafim from Permira and other minority stakeholders.

    The acquisition significantly broadens Mexichem's portfolio of specialty products, allowing it to "diversify and expand our end-markets and broaden our geographic footprint," Mexichem CEO Antonio Carrillo Rule said.

    Netafim's smart irrigation technology can be applied to heating and cooling, water management, data communications and other sectors, he said.

    Tel Aviv-based Netafim employs 4,300, has 17 manufacturing plants, offices in 30 countries and covers 110 national markets.

    Carrillo said: "It establishes us as a leading innovator in the high-growth, microirrigation market. At the same time, Netafim positions us to become a leading developer of solutions to address food and water shortages."

    "By combining our current irrigation portfolio with Netafim's business, we will create a formidable growth platform to drive synergies," he added. "With sales of almost $1 billion… this new business unit will have access to the resources, sales channels, and customer base of Mexichem's global business."

    He added: "We also see substantial operating efficiencies over time in raw material procurement, logistics, and the sharing of production processes and technology know-how."

    With annual sales of $5.4 billion, Mexichem has operations in 30 countries, employs 18,000 and has 120 manufacturing plants. It also owns two fluorite mines, 15 research and development laboratories and eight training academies.

    Netafim CEO Ran Maidan believes the deal gives both companies an improved cost position and broader portfolio to support profitable growth.

    "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," he said.

    Founded in London in 1985, Permira advises funds with a total committed capital of 32 billion euros ($35 billion).

    "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," said Michail Zekkos, a partner at Permira.

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