IDE Technologies, which develops desalination technology and operates treatment plants, is being put up for sale and could fetch a price of as much as $1 billion as well as give the company entry into the Arab markets it can’t touch as an Israeli company.
The board Israel Chemicals late on Tuesday approved in principle selling the company, which it jointly owns with Yitzhak Tshuva’s Delek Group. No investment bank has been chosen to manage the sale, but IDE could be sold for anywhere between $500 million and $1 billion, sources estimate.
IDE, which operates desalination plants using its proprietary technology for desalinating water as well as treating sewage and industrial waste, has been focusing on overseas projects lately, mainly in the United States, India, China and Chile. The company has a 70 million cubic meter plant in Carlsbad, California, due to begin commercial operations in the second half of 2015, and is erecting plants in India, Chile, Venezuela and Mexico.
As part of its overseas strategy, the company let go over 50 of its 500-strong Israeli workforce recently in order to hire more staff locally for foreign projects.
But IDE’s growth prospects are limited by the Arab boycott of Israeli companies. Some 60% of what is estimated will be a $105 billion global market for desalination during the years 2010-16 was in the Arab world.
Selling IDE to a foreign buyer would enable IDE to find customers in the Arab world. But to do that, IDE will also have to sell off its Israeli desalination plants, which it is operating on a build-operate-transfer basis, most likely to local institutional investors. The plants include stakes in a 120 million cubic meter facility in Ashkelon it built with the French company Veolia, another plant with 130 million cubic meters capacity in Hadera it owns with Housing & Construction Limited and an even bigger one of 150 million at Sorek it operates with Hong Kong’s Hutchison Whampoa.
Tshuva and ICL have been in a tense partnership for much of the time after Delek bought its 50% stake in the company in 2002. The two fought over the proper valuation for the company, once in 2010 when Tshuva sought to take the company public and didn’t due to ICL opposition, and another time in 2011 when Delek sought to sell its stake to ICL and against the two couldn’t reach an agreement on IDE’s valuation.
The sale of IDE, which ended the first half of the year with revenues of $112 million and a net profit of $7 million, comes as ICL and Delek both seek to pare down their holding to core businesses. For Delek, that is the giant natural gas operations it own stakes in offshore Israel.
For ICL, the slimming down process being undertaken through its “Next Step Forward” program aims to focus its operations on agricultural, food and engineered materials. In that context, it agreed last month to sell its German water -treatment business to KuritaWater Industries for 250 million euros ($311 million).