This month, as the kibbutz movement celebrates 100 years since its establishment, it finds itself in an interesting situation. For many years the kibbutz’s reputation as a model of middle-class society based on socialist values of equality and sharing has been waning. At the same time, kibbutz members can draw great encouragement from the power of kibbutz industries that have been getting stronger.
Kibbutz companies have been proving resilient in recent years and many have grown from small manufacturers to international corporations. Twenty kibbutz companies are currently traded on the Tel Aviv Stock Exchange today, and the number of kibbutz-owned companies traded on the TASE is set to double in the coming years.
Excellence Investments Ltd. kibbutz- desk head Tzahi Koren investigated the phenomenon and has marked out potential candidates for going public on the TASE in the kibbutz sector.
These candidates include: Tnuva Food Industries Ltd., irrigation-system developer Netafim Ltd., marble manufacturer Caesar Stone Ltd., sandal manufacturer Teva Naot Ltd., cosmetics company Dead Sea Laboratories Ltd., food-ingredient producer Galam Ltd., Tama Plastic Industry Ltd., Raviv ACS Ltd., Alex Medical, and Plazit Ltd.
Some of the companies selected by Excellence might hold an IPO, be sold or bring in partners.
“Estimates of the various data, such as sales and revenue, indicate that kibbutz industry factories have some more aces up their sleeves to pull out in the near future,” Koren said.
The first kibbutz industries began going public on the TASE in 1993. Over nearly two decades many other kibbutz industries have brought in private partners to invest in their factories.
An additional eight kibbutz companies have raised debt on the stock market by issuing bonds. Two kibbutz- owned companies – Shamir Optical Industries Ltd. and Amiad Filtration Systems Ltd. – broke the international barrier and held public offerings overseas.
Shamir Optical announced last Friday that French giant Essilor would buy half the company for $130 million in cash, and Amiad is traded on London’s Alternative Investment Market.
Alongside growing investor interest in kibbutz industries, the kibbutzim themselves have understood the importance of growing and bringing in business partners. Growth rests on exports, which requires capital for purchasing equipment and know-how, and developing marketing networks, which are necessary if the kibbutz company is to become an international firm on a global scale.
Therefore, in addition to public offerings, the kibbutzim have brought in private investors in recent years. Excellence believes that about 50 kibbutz factories have private partners and funds who have invested between NIS 20m.-NIS 80m. in each enterprise, according to the company’s market value.
Excellence feels that most of the private investments are carried out through investment funds that have raised the money in recent years from private and institutional investors. These funds have included Markstone Capital Partners Group LLC, Tene Investments, Shamrock Holdings, FIMI Opportunity Fund and Katzir Fund Debenture for Investment Ltd.
The main aim of kibbutz companies that hold an IPO is, of course, to raise capital for growth. But there is the additional advantage contained in reducing the level of risk of dependency of the kibbutz on the company.
“Even if the kibbutz is economically sound, it cannot put at the disposal of the factory the full resources of the kibbutz for the sustained period of time that is required for rapid growth,” Excellence said.
Another advantage, according to Excellence, is that external funding “is cheaper than raising capital through loans and also pays off by improving the image.” A public offering is considered a complex process that can take longer than a year, and the company’s management is expected to change its internal organizational structure of the company and set up a separate board of directors that will include experienced directors.
In addition, the agreements between the kibbutz and the future factory must change. “From past experience, members are given new salary agreements, and indemnity agreements are signed between the kibbutz and members to protect the rights of kibbutz members,” Excellence said.
Furthermore, ownership agreements for the land are signed with the kibbutz, the basket of services that the kibbutz will provide the factory are fixed, division of future profits between the various sides is determined, as well as what is permitted and what is forbidden, and standards of reporting for public companies are developed.
About 20 kibbutz companies are considering IPOs or bringing in private partners over the next two years to raise NIS 3 billion. The amount to be raised by the small and medium-sized factories is NIS 70m.-NIS 100m., with larger companies seeking to raise NIS 300m.-NIS 500m. or more through share or bond offerings and private placements.
“It looks like more and more kibbutzim are ready and ripe for IPOs and meet the requirements for a public offering,” Excellence said. “In addition, we believe that we will see bonds offerings by national and regional kibbutz organizations, similar to local authorities that raised debt on the stock exchange. These organizations include companies such as Granot, Miluot and Mishkey Hanegev.”
Excellence has also compiled a TASE Kibbutz Index that includes the following 16 companies:
1) Plasson Industries Ltd., Kibbutz Ma’agan Michael (69%), market cap NIS 885m.
2) Shamir Optical Industries Ltd., Kibbutz Shamir (63%), market cap NIS 697m.
3) Albaad Massuot Yitzhak Ltd., Kibbutz Massuot Yitzhak (59%), market cap NIS 546m.
4) Maabarot Products Ltd., Kibbutz Maabarot (59%), market cap NIS 550m.
5) Maytronics Ltd., Kibbutz Jezreel (70%), market cap NIS 480m.
6) Arad Ltd., Kibbutz Dalia (28%) and Kibbutz Ramot Menashe (28%), market cap NIS 415m.
7) Palram Industries Ltd., Kibbutz Ramat Yochanan (73%), market cap NIS 360m.
8) Solbar Industries Ltd., Kibbutz Hatzor (22%), market cap NIS 270m.
9) Gan Shmuel Foods Ltd., Kibbutz Gan Shmuel (41%), market cap NIS 271m.
10) Polyram (1999) Ltd., Moshav Ram On (17.8%), market cap NIS 230m.
11) Golan Plastics Products Ltd., Kibbutz Shaar Hagolan (68%), market cap NIS 155m.
12) Plastopil Hazorea Company Ltd., Kibbutz Hazorea (76%), market cap NIS 130m.
13) Raval Ltd., Kibbutz Raval (61%), market cap NIS 91m.
14) Ginegar Plastics Products Ltd., Kibbutz Ginegar (34%), market cap NIS 107m.
15) Kafrit Industries Ltd., Kibbutz Kfar Azza (78%), market cap NIS 78m.
16) Polysack Plastic Industries, Kibbutz Nir Yitzhak (48%) and Kibbutz Sufa (21%), market cap NIS 9m.
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