Singapore’s Temasek in Talks to Buy Israeli Drip Irrigation Firm Rivulus for Up to $500 Million

The sale of the world’s No. 2 maker, once a unit of John Deere, would yield the FIMI private equity firm an enormous return

Ishay Davidi, the head of the FIMI private equity firm, November 2017.
Eyal Toueg

Temasek, the Singapore state-owned investment company, is in talks to buy the Israeli drip-irrigation firm Rivulus for a price believed to be between $450 million and $500 million, sources told Haaretz.

If the sale goes through, it would mark another major success for Ishay Davidi’s FIMI private equity firm, which bought the company from the U.S. agricultural equipment maker John Deere in 2014 for just a net $40 million.

In 2015, FIMI sold a 20% stake in the company to India’s Dhanna Engineering for $34 million. Two years later, Rivulus bought Eurodrip, then the world’s No. 4 maker of drip-irrigation equipment, from the investment company Paine & Partners (now Paine Schwartz Partners) for a 25.5% stake in Rivulus. FIMI now holds 60% of Rivulus.

The sale to Temasek comes as concerns about the environment and water wastage are boosting sales of drip-irrigation technology. One recent study estimates that the global market will rise to $8.5 billion by 2025 from $4.9 billion last year  compounded annual growth of 9.6%.

Israel not only pioneered the technology in the 1950s but remains the home of the world’s biggest makers of the equipment, led by Netafim. Mexico’s Mexichem bought an 80% stake in Netafim in 2017 for $1.5 billion in a sale managed by Goldman Sachs.

Last August, FIMI retained Goldman to manage the sale of Rivulus, the world’s second-largest maker of drip irrigation equipment.

A Rivulus drip-irrigation system at Kibbutz Nahal Oz.

Rivulus’ history goes back to the early 2000s, when John Deere sought to build a $1-billion-a-year water-technology business called John Deere Water by buying up irrigation-equipment makers. That included the Israeli company Plastro, which John Deere bought for $120 million from Kibbutz Gvat in the north. But the plan failed and by the time FIMI bought the company that would become Rivulus, the business was losing $3.5 million a month.

FIMI dubbed its new acquisition Rivulus, moved its headquarters back to Israel, shifted production lines from China to Israel and fired more than 20% of its employees.

Today it has 1,300 employees in 17 factories around the world. Rivulus’ revenues grew 8% last year to $390 million, weighed down by the financial crisis in the key Turkish and Argentine markets in the first half of the year. Even so, earnings before interest, tax, depreciation and amortization jumped 29% to $45 million. A new factory in Mexico is expected to boost growth further this year.

Goldman sold Netafim for 14.8 times the company’s net asset value, but Rivulus, even at the top end of the price range under negotiation, would not be valued at more than 11.1 times. In any case, Rivulus is valued in FIMI’s books in the single-digit millions of dollars, so the return on its investment would be a stellar 50 to 60 times.

Formed in 1974, Temasek manages assets worth about $230 billion across a broad spectrum of industries that include financial services, telecommunications, media & technology and agribusiness. It holdings also include Singapore Airlines. Temasek aimed to buy Netafim when it was up for sale in 2017 but was outbid by Mexichem.