Israel Petrochemical Enterprises Buys 20% of Avgol

Buying the nonwoven textiles maker is part of expansion strategy in tangential areas, says company

Omer Sharvit
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Omer Sharvit

Israel Petrochemical Enterprises (TASE: PTCH) is buying 20% of nonwoven textiles maker Avgol for $18 million cash.

Until now their relations were confined to Petrochemicals selling raw materials to Avgol.

The deal prices Avgol at $90 million.

Avgol has manufacturing facilities in the Barkan industrial zone of Israel and in China. In the last year the company made moves to float stock on the Tel Aviv Stock Exchange, but hasn't taken the leap.

It sells mainly to makers of diaper and disposable underwear for babies and adults.

Petrochemical also received an option to buy another 13% of Avgol (at full dilution) for $18 million, and an option to buy 5% more from Avgol's controlling shareholders over three years, again at a company valuation of $90 million.

Finalization is contingent on the approval of the Antitrust Authority and the banks financing Petrochemical.

For the first quarter of 2006 Avgol netted $4.6 million, down from $7.7 million in the same period of 2005. Its turnover in 2005 reached $163 million, an increase of 32.5% against 2004.

Petrochemical manager Eran Schwartz commented that the company's strategy involves acquisition of companies in its field and in tangential ones, in Israel and abroad.

Avgol chairman Shuki Goldwasser explained that the sale complements the management buyout of the company. "Bringing in Petrochemical as a strategic partner will contribute to and accelerate Avgol's rapid growth," he said.

Maybe: meanwhile Petrochemical reported a slide in first-quarter profit against the parallel quarter. First-quarter sales reached NIS 288.6 million but operating profit sank 52% year over year to NIS 32 million. It netted NIS 31 million, against NIS 50 million in the same period of 2005.

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