28 Nov, 2016 7:55
The Israeli kibbutz company manufactures products for use in urological catheters and cardiology balloons.
Negotiations are taking place for the acquisition of Degania Silicone for $250-300 million. The company manufactures silicon products for use in medical equipment, such as urological catheters and cardiology balloons. The prospective buyer for the company is US medical equipment company Q Holdings, owned by US-UK company 3i. The owners of Degania Silicone are Viola Private Equity, Kibbutz Degania Bet, and the IGI fund.
Viola invests $27m in Degania Silicone
Kibbutz Degania Bet and Omri Mairon founded Degania Silicone in 1984. Viola acquired 40% of Degania Silicone in 2010 for $27 million, meaning that it will receive back triple its investment if the acquisition goes through. The kibbutz received the $27 million, and will receive at least triple that amount under the deal. Every kibbutz members will be entitled to NIS 1.7 million before tax from the deal.
Mairon and former CEO Amos Nahir, who own 11% of the company, will also receive tens of millions of dollars from the acquisition. IGI, owned by Eli and Nir Barkat, own 19% of the company’s shares, which they bought in 2006 for $4.8 million. IGI will receive eight times its investment.
The company is currently managed by CEO Rami Zajicek, former CEO of Taro Pharmaceutical Industries Ltd. (NYSE: TARO), who will receive a multi-million shekel bonus from the deal.
Degania Silicone began by producing simple silicon products, such as pacifiers and bathtub corks. At a certain point, however, its managers felt that the added value in this sector was low, and led by Mairon and Nahir, the company began producing products for the medical market. Most of Degania Silicon’s products are made for large companies and sold to them, not to end consumers. The company’s annual revenue is estimated at $90 million.
Before Viola invested in the company, Degania Silicone acquired a factory in India, thereby substantially cutting its costs and improving its profit margin. The Indian plant products mainly goods requiring manual labor, while the plant in Israel is more automated. Degania Silicone currently has 1,600 employees, including 600 in Israel (mostly on Kibbutz Degania Bet, but also from Kibbutz Shomrat and Jerusalem). Most of the other employees are in India, but the company also has other facilities around the world. The acquiring company has already signed long-term agreements with the kibbutz, which hopes that the deal will not affect the employment of Israelis.
Q Holdings develops and markets elastic products for use in electrical conductors, insulation, medical equipment, and pharmaceuticals.
Published by Globes [online], Israel business news – www.globes-online.com – on November 27, 2016
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