The 240 members of Kibbutz Metzer are on their way to making a tidy profit on the drip irrigation business they established nearly 50 years ago.
TheMarker has learned that the kibbutz is in talks with an unidentified foreign investment fund to sell a big stake in its Metzer Group in a deal that values the maker of drip irrigation systems and related products at 300 million shekels ($84.7 million).
The kibbutz wouldn’t confirm the report but sources close to the deal told TheMarker that the fund would be buying no less than 25% of Metzer Group and possibly more than 40%. That would mean proceeds of 75 million to 150 million shekels, most of which will be going into the pockets of Kibbutz Metzer’s members.
A final deal is expected to be tied up within three months, the sources said. The kibbutz will retain control of the company after the deal, holding more than 50% of the shares, they said.
Metzer Group is a relatively small company, but drip irrigation, a technology developed in Israel in the 1950s, is a big business. An 80% stake in Netafim, the biggest and oldest company in the industry, was sold to Mexichem two years ago for $1.5 billion and an estimated 60% of Israel’s farm fields are irrigated with drip systems.
Demand for the technology has been growing, especially in the developing world and due to climate change, which is prompting farmers to more carefully consider how they use their water. Still, 85% of irrigated land globally uses the traditional system of flooding fields, a practice that is hugely wasteful and depletes the soil of nutrients. An Israeli startup N-Drip has developed a low-cost system that promises to make drip irrigation more affordable.
Metzer Group employs about 200 people, 45 of them kibbutzniks, and has annual sales of about 300 million shekels. Its products, which include drippers and drip lines, PE irrigation pipes, fittings and accessories for irrigation systems, are sold all over the world. It also has factories, formed as joint ventures, in a number of other countries.
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The foreign fund investing in the company was recruited with the goal of promoting Metzer’s global expansion, especially for its core irrigation business.
The company was formed in 1970 after the kibbutz, which is located close to the town of Hadera, was looking for way to create jobs for members. With limited access to new land or water, it opted for manufacturing plastic profile extrusions and sachet filling lines for shampoo and other liquids.
That business evolved into Metzer Group, which is today’s the kibbutz’s main form of income. The company also makes piping and equipment for manufacturing drip irrigation equipment. Since 2011, Metzer has been the main sponsor of the Hapoal Tel Aviv basketball team.
Until a year ago, the company was 25%-owned by Gaon Group, a unit of the Viola technology-focused investor group. The two disagreed over strategy and Kibbutz Metzer bought out its partner at a 175 million shekel valuation of the company.