Mexichem buys Israeli Water Irrigation Giant Netafim for $1.5 Billion

Water, ironically enough, is a hot topic lately. Scarce and precious, it often poses a question to governments and developers alike, bringing forth bigger issues such as the handling of modern agriculture and food security. The answer is often presented in innovative formats such as those that have been cropping all across India lately, seeking to maintain a sustainable and efficient water management protocol. The World Business Council for Sustainable Development’s (WBCSD) newest report on India’s agriculture points to many possible solutions, one of which is the rising star in irrigation tech- drip irrigation- a market which is projected to grow at a CAGR of 11.6% from 2017, reaching $6.54 Billion by 2022. The hype is justified, as the results shown in the WBCSD’s report point to higher yield and income, as well as massive reductions in energy use, gas emission and labor cost. Asia-Pacific, unsurprisingly, is predicted to become the largest market in drip irrigation- making many foreign players consider entry to the field.

One of the new potentials is Mexichem, a Mexican company specializing in pipes who recently acquired world’s largest irrigation company, Israel’s Netafim, for $1.5 billion. With a stake of 80% in Netafim Mexichem hopes to become a global leader in irrigation. Considering Netafim’s estimate of $950 million in profits, an EBIDTA of $135 million for 2017 and its obvious foothold on the markets in the east- the aspiration is not too farfetched.

The change of hands is the second one in six years for Netafim. Back in 2011 the private equity firm Permira has held majority stake in Netafim (61%), then valued at $850 million on account of $820 million in profits and an EBIDTA of $117 million. Despite similar numbers in 2016 – $875 million in profits and an EBIDTA of $115 million –this recent acquisition puts Netafim’s value at an impressive $1.9 billon. With a promise to keep production in the next twenty years inside the country, Netafim’s acquisition reaffirms Israel’s position as a leader in the global water market.



On the drip-irrigation market

WBCSD’s report

On the acquisition

Israeli coverage (in Hebrew)

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