Jain Irrigation merges global business with Temasek-backed Rivulis; to retire debt

Jalgaon-based Jain Irrigation Systems LTD (JISL) has announced that its global irrigation business will be merged with Temasek-owned Rivulis to create the second largest global irrigation company.

The debt-ridden company announced that its International Irrigation Business (IIB) with merge with global micro irrigation leader Rivulis in a Rs 4200-crore cash-and-stock deal that will result in creation of a combined entity with revenues of $750 million.

IIB’s enterprise value as been pegged at Rs 4200 crore. Jain Irrigation will use the cash proceeds from the deal to pay off about Rs 2700 crore of overseas debt. Post-merger, Jain irrigation will hold 22 per cent stake worth Rs 1300 crore in Rivulis. Another Rs 200 crore from the deal will be used to settle receivables, Jain Irrigation Systems LTD Managing Director Anil Jain said.

The merged entity will be dual headquartered in Singapore and Israel and will continue to be named Rivulis Pte Ltd. For the purposes of corporate branding, the company will be represented as Rivulis (In alliance with Jain International).

Richard Klapholz, the current Rivulis CEO, will continue to lead the company while top senior associates from IIB are expected to continue in their leadership roles. Singapore Government-owned Temasek is a global investment company with a net portfolio value of US$381 billion as at March 31, 2021.

As per the arrangement, Jain Irrigation Systems will have a long-term supply agreement with the merged entity, which would drive revenues and profits. The merged entity will continue to use and promote prominent JAIN brands in markets where they have significant presence and value.

Jain Irrigation will also have a 10-year supply agreement with the merged entity besides a no-compete pact with Rivulis. JISL will continue to supply products in the Indian subcontinent.

This deal will allow Jain Irrigation reduce its consolidated debt by around 45 per cent (Rs 2664 crore) on a consolidated level while allowing it to retain a significant minority stake in the merged company. The transaction is the second step in Jain Irrigation’s quest to significantly deleverage its balance sheet overseas & in India and focusing on its rapidly growing India business, the company said in an official statement.

“We are very happy to enter this alliance with Temasek, a globally recognised investment company with values that align with ours on creating sustainable and impactful Hi-tech agri businesses. We anticipate that the merger with Rivulis will create a world leading player ideally placed to serve its global customer base thanks to its geographic footprint, breadth of offerings as well as technological depth and expertise in micro irrigation”, said Jain.

“This will enable us all to address climate change and food security challenges with sustainable solutions and implement the critical knowledge transfer for water efficiency and productivity for growers. We look forward to this value accretive long-term relationship to create meaningful positive impact in the agri and food ecosystem. At the same time, we also look forward to jointly explore collaboration opportunities with Temasek in the future of food and agriculture, including areas relating to ESG, hi-tech agricultural inputs, technology innovation, as well as solutions to benefit small holder farmers.”

Jain Irrigation said it will focus on further improving on the India business to drive higher growth and margin in one of the fastest growing irrigation markets in the world, and eventually aim to reduce debt on the standalone Indian business balance sheet as well – as agreed with the lenders in the recent restructuring.

The merged entity is expected to have unparalleled market coverage with 25 factories and 3,300 employees across six continents and 35 countries. The company will continue to fully support the brands that growers and business partners have come to rely upon season after season: Rivulis, Jain, NaanDanJain and Eurodrip, the statement added.

“We are thrilled to have both companies join forces to better serve the growing needs of irrigation markets around the world. While benefitting from significant operational economies of scale and a dedicated, diverse employee base, we will ensure that all commitments to our grower community and to our combined business partners are maintained and further strengthened. Our goal is to ensure that all our customers will continue to be successful and benefit from a broader offering, leading industry brands, expanded manufacturing base and the support of leading irrigation services businesses”, said Rivulis CEO Richard Klapholz.

“Rivulis, before the merger, represented the combination of four companies, and through this merger, several more companies from Jain Irrigation’s portfolio will be added, cementing our role as a market consolidator and leader across the globe and creating a single company with a much stronger financial foundation”, he added.