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Mexichem to buy drip irrigation pioneer Netafim for $1.5 bn

New Delhi : Mexico-based global leader in plastic piping, chemicals & petrochemicals business Mexichem has said it would acquire a controlling 80 per cent equity stake in the world's largest drip irrigation company Netafim of Israel.

Through a combined cash-and-debt deal, Mexichem will gain access to Netafim’s smart irrigation technology that includes digital crop management and automation systems that help reduce water and nutrient usage.

Mexichem, which had 2016 revenues of $5.3 billion, will buy the stake in Netafim from existing shareholders led by private equity fund Permira. The other two shareholders divesting stakes are Kibbutz Magal and Kibbutz Hatzerim.

The total enterprise value of the transaction is $1.895 billion. Mexichem will pay $1.5 billion to buy out all of Permira's 61 per cent equity stake, six per cent of Kibbutz Magal shares and 13 per cent of Kibbutz Hatzerim, which currently holds 33 per cent in Netafim.

Kibbutz Hatzerim will retain the remaining 20 per cent equity stake in Netafim, which will also retain its Israeli identity and headquarters and operations for several years. The deal is expected to close in the fourth quarter of 2017.

Founded in 1965, Netafim is the global leader in smart irrigation solutions. The company has 29 subsidiaries, 17 manufacturing plants and over 4,300 employees worldwide and delivers innovative solutions to growers of all sizes - from smallholders to large-scale agricultural producers in over 110 countries.

The company has a presence in India through Netafim Irrigation India Pvt Ltd, a wholly-owned subsidiary established in 1997 in Vadodara that competes with Jalgaon-based Jain Irrigation Systems Ltd (JISL) in the micro-irrigation and drip irrigation market. Jain Irrigation is now considered the world's second largest micro-irrigation company.

"This is a transformational acquisition that advances Mexichem’s drive into specialty products and solutions. The synergies between the companies will enable us to strengthen Netafim’s position as a leading innovator in the high growth, micro-irrigation market. 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 eventually can be applied to create other “smart” industrial solutions", said Mexichem CEO Antonio Carrillo Rule.

In the past few years, Netafim has delivered strong financial results – with significant top-line growth and improving profitability. It recorded sales of $855 million in 2016 and has invested in penetrating new markets and strengthening product offering.

The strong foundations of the company, good financial results, together with its growth potential following its investment in growth engines, have led Mexichem’s decision to invest in Netafim and strengthen its offering in the irrigation segment.

According to the agreement between the two companies, Netafim's core activities will be kept in Israel, including R&D and production activities for many years.

"We were looking for a strategic partner to Netafim that will enable us to continue develop the company and bring it to the next level. We are proud to have won the trust of a leading company such as Mexichem and believe that together we can ensure Netafim’s growth and success” said Netafim President and CEO Ran Maidan.

”The conditions of the agreement maintain Netafim’s Israeli identity, with commitment to keep the company core activities in Israel for many years", he added.

Mexichem has an extended portfolio of products targeted at high growth sectors such as infrastructure, housing, datacom, water management, among others.

Through its Fluent Business Group, the company provides solutions in agricultural, civil and project engineering, relating to the handling, use and control of water in farming, fishing and aquaculture, as well as solutions for power transmission and distribution of commercial, industrial, governmental and agricultural electrical applications.

Mexichem’s Fluent business in India, through the Dura-Line brand, is a leading international manufacturer and distributor of communication and energy infrastructure products and systems, including conduit, cable-in-conduit, pipe, and accessories.

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