FIMI Offers $50 Million for Control of Pool Robot Maker, Below Market Price

FIMI fund has submitted its first formal offer to acquire control of Kibbutz Yizrael's pool robot manufacturer, Maytronics. The non-binding offer proposes an investment of NIS 200 million ($50 million) in cash at a pre-money valuation of NIS 200 million. This offer, priced at NIS 1.821 per share, represents a discount of approximately 8% to Maytronics' recent market closing valuation of NIS 218 million ($55 million).

The offer includes two additional options for FIMI. The first allows for an extra NIS 50 million investment at NIS 2.276 per share, valuing the company at NIS 250 million pre-money. The second option permits a further NIS 100 million investment at NIS 2.732 per share, valuing the company at NIS 300 million. These options, exercisable over extended periods, would allow FIMI to increase its stake after assessing the success of a recovery plan. If all options are exercised, FIMI would hold about 60% of the company, reducing Kibbutz Yizrael's stake from its current 56% to 22%, shifting it from a controlling owner to a minority shareholder.

Maytronics has granted FIMI an exclusive 60-day period for due diligence and negotiation of a binding agreement, with an option for automatic extension. The deal's completion is contingent on several factors, including the completion of due diligence, signing investment and shareholder agreements, approval from company bodies like the general assembly, and necessary regulatory approvals. A special independent committee, comprising members of the audit committee, has been appointed to manage negotiations on behalf of Maytronics, a common practice when the controlling shareholder has differing interests from other shareholders.

Maytronics, founded in 1990 by Kibbutz Yizrael, is known for its Dolphin brand of robotic pool cleaners. The company expanded into automatic pool covers, anti-drowning alarms, and water treatment products, with nearly all revenue generated internationally, primarily from the US and Europe. Once a major success in the kibbutz industry, Maytronics' market value peaked at approximately NIS 2.2 billion ($550 million) in late 2017. The COVID-19 pandemic boosted demand, leading to a market value of NIS 9.1 billion ($2.3 billion) by late 2021, and inclusion in the TA-35 index.

However, the company has faced significant challenges recently. Post-pandemic, distributors were left with large inventories, and cheaper Chinese robots entered the market. This led to a revenue drop from NIS 1.62 billion ($405 million) to NIS 1.4 billion ($350 million) in the last full year, resulting in a net loss of approximately NIS 222 million ($55 million), partly due to a NIS 100 million ($25 million) write-down in water monitoring operations. The first half of the year saw revenues decrease by 13% to NIS 747 million ($187 million) and a net loss of NIS 34.5 million ($8.6 million). The company also accumulated a NIS 600 million ($150 million) bank debt, with equity falling to NIS 314 million ($78.5 million). The proposed investment aims to reduce debt, relocate some production to lower-cost countries, and strengthen direct-to-consumer sales.

FIMI's approach aligns with its strategy of investing in struggling industrial companies and taking control. The offer price, below the stock market valuation, likely reflects the perceived risk. Public shareholders will need to weigh the discount against the prospect of a fully funded company under new management with turnaround experience.