Generation Capital (TASE: GNRS) infrastructure and energy fund, through its fully-owned subsidiary GES, has signed an agreement to acquire a 75% stake in KMM Recycling Industries for NIS 195 million. KMM was founded and is managed by the Kortov family and as part of the agreement, the sellers will continue to provide management services until at least September 2024.
As part of the deal, KMM will distribute a dividend for its 2021 profits, for which GES’s share is expected to amount to about NIS 20 million. The agreement includes put and call options to acquire 25% of the additional shares.
GES’s management says that KMM’s activities fit well into market trends and the strategic plan published by the Ministry of Environmental Protection. The acquisition of KMM represents an opportunity for major growth for GES, by creating a significant synergy between the activities of KMM and the other activities of GES in the environmental sector, which includes: Zero Waste Ltd. (50%) and Dekel Infrastructures Ltd. (50%). The integration of KMM into GES represents a major pillar in building the value chain of GES in the environmental sector and will strengthen GES’s position in the waste market, which in the estimation of the company, is expected to grow significantly in the coming years.
KMM operates in the recycling and environmental sector and provides services to millions of customers in Israel in the private, business and municipal sectors including services for collecting and shredding paper and more. The company mainly handles waste that is separated at source from all types of garbage including paper and cardboard waste and as part of these activities, the company also provides services in the field of unique classified materials (it is considered a leader in the information security sector in Israel and provides protection services, which meet the strictest standards), tires, plastic, packaging, textiles as well as sorting municipal waste. As part of these activities, KMM is engaged in collecting, sorting, shredding, handling and processing of waste, collected throughout Israel, from a range of local authorities and institutional and private bodies as well as selling the products from recycling in Israel and exporting them.
KMM provides services to millions of residents throughout the country, has 550 employees and a fleet of about 150 trucks and vehicles, and undertakes operations including treating, processing, and recycling at its five main plants – two recycling plants for sorting and packing paper and cardboard waste in Rishon Lezion and in Nitzanei Shalom, a plant for sorting packaging waste and a plant for sorting municipal waste in Rishon Lezion and a plant for handling and recycling waste from tires in Beer Sheva (to the best of KMM’s knowledge, this plant is one of only two such pants in the sector in Israel).
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KMM’s revenue in 2021 totaled NIS 242 million, compared with NIS 200 million 2020, and EBITDA in 2021 totaled NIS 50 million, compared with about NIS 27.6 million in 2020. Net profit in 2021 totaled NIS 28 million, compared with NIS 12 million in 2020. The acquired company has a net financial debt of about NIS 36 million.
The financing of the deal will be carried out mainly by an injection of capital from the company, with the source expected to come from raising debt that the company will conduct.
Generation Capital CEO and GES chairman Erez Balasha said, “The acquisition of KMM represents a central pillar in realizing the growth strategy of GES, in consolidating its position as a leading player in Israel’s waste market, an area that is essential for the well-being of the residents of Israel. KMM has an experienced team, broad deployment, quality customers and widespread connections and is the optimal platform for integrating into the environmental activities of GES, with full synergy on the entire value chain in the waste sector. Its activities fit in with the strategy of the Ministry of Environmental Protection and makes for fertile ground for growth.”
GES CEO Michael Dayan added, “KMM is a leading player in its sector, possessing knowhow and major experience in handling waste and producing products from it. It has the processing and recycling ability for some of its products, which increases profitability and its own transportation network. These and other capabilities are synergistic to activities at Dekel Infrastructures and Zero Waste, and we believe that they will improve the profitability of GES’s activities and will consolidate our status in the waste sector, as the main company creating a waste treatment revolution in Israel, which in our estimation is expected to grow significantly in the coming years.”
Generation Capital is the first and largest traded fund in Israel in the infrastructures and energy sector. The fund manages a portfolio of assets worth about an accumulated total of NIS 2.4 billion in the following areas: electricity production, renewable energy, transport, natural gas distribution, logistics, water, wastewater, and the environment. Generation Capital is headed by Joseph Singer, who serves as chairman, and CEO Erez Balasha, who both founded the fund and both have proven experience in managing businesses in the infrastructures and energy sector.
Published by Globes, Israel business news – en.globes.co.il – on January 25, 2022.
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