Netafim Irrigation Systems to Raise $250 Million

Netafim irrigation systems is exploring the possibility of raising up to $ 250 million through domestic or foreign bonds as well as credit facilities totalling $ 150 million. Funding will be used to recycle existing debt of $ 230 million.

Netafim is controlled by foreign private equity fund Permira and is engaged in the development and marketing of drip irrigation systems and operates in 110 countries worldwide through 31 subsidiaries. The company has an annual turnover of $ 800 million and employs approximately 4,000 workers.

The new bonds will also be used to finance the business operations of irrigation but will not be used for repayment of loans or for the benefit of shareholders dividend distribution.

According to data, EBITDA (operating cash profit) of Netafim in 2013 dropped to 11%, compared to 13.5% in 2012. The company's profitability in recent years has been adversely affected by fluctuations in foreign exchange rates.

Analysts note that efficient water use and improvements in productivity associated with using drip irrigation solutions is likely to increase the demand for such products in the near future. Netafim is recognized as a global leader in drip irrigation systems and it is believed that this development represents a big growth opportunity for the company.

The company is expected to maintain its leading market position in drip irrigation equipment, while maintaining the ratio of FFO (operating cash flow) debt exceeding 12%, in accordance with its operating base.

It has been reported that Netafim is in advanced negotiations to clinch a deal worth about $ 200 million to supply pumping systems and underground drip irrigation to an Ethiopian government sugar cane company. The deal will be financed by a consortium of Israeli financial institutions led by Bank Hapoalim.

Three years ago Permira fund bought a 61% stake in Netafim at a company value of $ 850 million (of which $ 360 million was in cash and a loan of $ 150). A group of selling shareholders in the transaction included the kibbutzim Magal, Iftach and Hatsirim.

Kibbutz Industries Association Leonardo Da-Vinci 13, Tel-Aviv 61400, Tel: 03-6955413, Fax: 03-6951464, E-Mail: kia@kia.co.il