Israel's Rivulus, World’s No. 2 Drip Irrigation Maker, Is on the Block for $500 Million

The company, once owned by John Deere, is being sold by the FIMI private equity fund

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A Rivulus drip-irrigation system at Kibbutz Nahal Oz.
A Rivulus drip-irrigation system at Kibbutz Nahal Oz.Credit:

The Israeli drip-irrigation company Rivulus is being put up for sale by the FIMI private equity fund and could fetch a price as high as $500 million.

FIMI has retained Goldman Sachs to find a buyer for the company, the world’s second-largest maker of drip-irrigation equipment after Israel’s Netafim. The U.S. investment bank also managed the 2017 sale of an 80% stake in Netafim to Mexico's Mexichem for $1.5 billion.

Goldman sold Netafim for 14.8 times the company’s net asset value. If it achieved the same valuation for Rivulus, the company could be sold for $550 million, but sources said it was unlikely to achieve that, if for no other reason than Rivulus isn’t the world’s market leader like Netafim.

In addition, sources said sales growth at Rivulus was likely to be a modest 3% this year, with sales reaching about $370 million. Earnings before interest, tax, depreciation and amortization are expected to grow by $5 million and reach $40 million this year. In addition, Rivulus faces high raw-material costs and the impact of a strong shekel on its price competitiveness in export markets.

As a result, Rivulus could fetch a price of $450 million to $500 million, sources said.

News of the sale comes just days after TheMarker reported that Kibbutz Metzer is in talks to sell a stake in its Metzer Group, which also makes drip-irrigation gear, to an unnamed foreign investment fund for about 300 million shekels ($85 million). Demand for drip irrigation has been growing, especially in the developing world, as climate change encourages farmers to use water more carefully.

Israel not only pioneered the technology in the 1950s but remains the home of the world’s biggest makers of the equipment.

Despite the relatively low valuation for Rivulus, the sale would mark a huge return on FIMI’s original investment. The fund, which is managed by Ishay Davidi, bought the company from the U.S. agricultural equipment maker John Deere in 2014 for just a net $40 million.

In the early 2000s, Deere had sought to build a $1 billion-a-year water-technology business by buying up irrigation-equipment makers. That included the Israeli drip-irrigation maker Plastro, which it bought for $120 million from Kibbutz Gvat. But the plan failed and by the time FIMI bought the company that would become Rivulus, which had been named John Deere Water, the business was losing $3.5 million a month.

FIMI sold a 20% in the company in October 2015 to India's Dhanna Engineering for $34 million, earning back most of the original capital it spent buying Rivulus.

In 2017, Rivulus bought Eurodrip, then the world’s No. 4 maker of drip irrigation equipment, from the investment company Paine & Partners (since renamed Paine Schwartz Partners) in exchange for a 25.5% stake in Rivulus.

In addition, under FIMI, Rivulus moved its headquarters back to Israel, moved production lines from China to Israel and fired more than 20% of its workforce. Today it counts 1,300 employees in 17 factories around the world.

In related news, Fortissimo, another Israeli private equity company, is in advanced talks to sell OriGene Seeds to the Japanese company Mitsui for between $80 million and $100 million.

OriGene breeds hybrid varieties of vegetable seeds to improve their quality, shelf life, yield and environmental tolerance. It sells over 90 types of seeds across eight product families and collaborates with research institutes to develop new traits and varieties.

Founded in 2004, the company has about $10 million annually in sales and operates facilities in Israel, California and Chile.

Fortissimo acquired 50% of OriGene from co-founder Yuval Cohen in October 2015 for 80 million shekels. Eyal Vardi, the other co-founder, stayed on as CEO and retained his 50% stake. The sale could yield Fortissimo a return of four times its original investment.