Mexican industrial group Mexichem will acquire control of Israel’s Netafim, the world’s largest drip irrigation company, for $1.5bn.
On Monday, Mexichem announced its plans to buy 80 percent of the Israeli company from shareholders led by Permira, the private equity firm that currently owns 61 percent of Netafim.
As the world’s agricultural needs change due to rising demand for food and an increasingly scarce global water supply, Netafim’s micro-irrigation technology has attracted attention from investors as well as companies.
“The world’s population growth will require significant demand for food — and Netafim’s technology has the best solution for this,” Mexichem’s chief executive Antonio Carrillo Rule told the Financial Times.
The deal with Mexichem values the drip irrigation pioneer at $1.9bn.
According to its website, Netafim is one of the biggest producers of plastic pipes and connections worldwide and one of the largest chemical and petrochemical companies in Latin America.
“This is a strategic acquisition that strengthens our unique basket of solutions and products,” Mexichem’s chief executive Antonio Carrillo Rule said in a statement, adding that the acquisition will give his company access to Netafim’s “advanced technologies that can be used as a basis for smart solutions in other industrial fields.”
Netafim was founded in Israel’s arid southern Negev region at Kibbutz Hazerim, an agricultural community, in 1965.
The company developed a system that cuts water use by as much as three quarters, while ensuring that crops get the water they need to thrive.
Millions of farmers use Netafim’s technology to increase their yields.
Using wireless software, instructions are given to sensors in the field on how much water to dispense and when.
Netafim now boasts 17 manufacturing plants around the world, 4,300 employees and its products are sold in 110 different countries.
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The company had sales of around $855m last year alone.
Mexichem’s acquisition will see Kibbutz Hatzerim sell down part of its stake, retaining a minority 20 percent holding in Netafim.
“This acquisition is a reaffirmation of Israel’s undisputed role as a world leader in water tech and specifically drip irrigation, which has been pioneered by Netafim, with its technology and services being used the world over from crop management, cutting water usage and streamlining the agricultural process,” Arsen Ostrovsky, director of the Israeli-Jewish Congress, an organisation supporting Israel in the international community, told Verdict.
“The acquisition is also another sign that major global companies seeking world’s best technology and innovative products are flocking to Israel as their primary destination,” he added.
The deal is subject to regulatory approval, and is expected to close within the last quarter of 2017.
Shraga Brosh, the president of the Manufacturers Association of Israel, said on Monday that the agreement between Mexichem and Netafim is “a testament, more than a thousand words, to the attractiveness of Israel’s water industry, considered to be one of the most advanced industries in the world.”