As every month, VC Cafe is re-posting the “Invest in Israel” Newsletter, published by the investment promotion center of Israel’s Ministry of Industry, Trade and Labor, which offers many helpful tools for prospecting investors. See the March 2010 edition after the jump. For previous editions, click here.
FDI, M&A’s WEIGHED DOWN BY CRISIS IN 2009, UPTURN EXPECTED IN 2010
Foreign direct investment in Israel reached $3.8 billion in 2009, compared with $10.8 billion in 2008 and $8.8 billion in 2007, as investors worldwide tightened their belts in the wake of the global financial crisis.
Proceeds from M&As involving Israeli companies that were either acquired or merged, totaled $2.54 billion, 7 percent below 2008 levels ($2.74 billion), and 33 percent lower than proceeds in 2007 ($3.79 billion).
63 Israeli companies were acquired or merged in 2009, a 28 percent drop from an average of 87 companies in the previous three years. The top ten deals in 2009 yielded 80 percent ($2.02 billion) of the total for the year as four deals exceeded the $200 million mark and five deals exceeded the $100 million mark. The average deal size in 2009 was $40 million, an increase of 21 percent from $33 million in 2008.
The most noteworthy M&A deals of 2009 were Siemens’ $418 million acquisition of Solel; Medtronic’s acquisition of Ventor, estimated at $325 million; and IBM’s $225 million acquisition of Guardium.
ISRAELI GROWTH PER CAPITA IN 2009 2ND HIGHEST AMONG OECD COUNTRIES
The Central Bureau of Statistics said that Israel’s GDP rose by an annualized 4.9% in the fourth quarter of 2009 and that growth for the year was 0.7%, slightly higher than earlier estimates. Given Israel’s population growth rate of 1.7%, GPD per capita only declined by 1.1%, placing it second among OECD countries for having the lowest negative growth per capita after Australia; the OECD average was minus 4%.
Israel’s central bank, Morgan Stanley and other financial institutions have forecasted 3.5% real GDP growth for Israel in 2010 in the absence of extraordinary developments, and Fischer has said the economy may grow more than that if the global recovery accelerates.
TEVA INCREASES WORLD MARKET SHARE IN RATIOPHARM PURCHASE
Teva Pharmaceutical Industries Ltd., the world’s largest maker of generic drugs, acquired German generic pharmaceuticals company Ratiopharm for $4.9 billion. Through the acquisition of Ratiopharm, which is the second-largest player in the German generics market, Europe’s biggest, Israel’s Teva becomes number one in Europe as its presence in Spain, Italy and France is also boosted.
The deal is expected to capture significant synergies for Teva. US drug powerhouse Pfizer and Iceland-based Actavis were among the bidders in the final round, but Teva beat their offers. In 2008, Teva acquired American company Barr Pharmaceuticals, a maker of generic birth control pills, for about $7.5 billion, and in 2005 it bought another generics competitor, Ivax, based in Miami, for about $7.4 billion.
Teva, Israel’s largest company, has a market value of about $56 billion. Ratiopharm, a privately-owned subsidiary of German holding company VEM, was founded in 1973 and has annual sales of about $8.6 billion.
ISRAELI CABINET APPROVES 2-YEAR MODEL FOR BUDGET 2011-2012
The Israeli Cabinet approved Finance Minister Yuval Steinitz’s proposal to continue with the biennial state budget model in 2011-2012. The 2-year model, which was also backed by the Bank of Israel, will allow the government to present a long term plan and maintain market stability.
“We see the government’s decision to adopt two-year budgets as integral to the success of the new fiscal rule,” Peter Doyle, head of the most recent International Monetary Fund mission to Israel, said. “It will avoid the burden of annual budget negotiations and thereby allow greater focus on efficient implementation of expenditure policies.”
The ministers also unanimously approved Steinitz’s proposal to implement a calculation system that would increase the government’s annual expense rate from 1.7% to 2.6%.
“Firm commitment by the government to this rule, starting with the next budget, will help to anchor market expectations and confidence,” said Doyle. “This is critical given still heightened uncertainties in the global economy as well as ongoing geopolitical issues in the region.”
The parliamentarians are expected to pass the budget with minimal changes by the end of 2010.
BANK OF ISRAEL APPROVES NEW LAW, FISCHER TO SERVE SECOND TERM
As a boon to the Israeli market’s future stability, the Bank of Israel approved a new law that specifies price stability as the central bank’s primary goal, forms a board of directors with a majority of members who are not bank employees, and creates a six-member committee to set interest rates.
Taking the new law into consideration Bank of Israel Governor Stanley Fischer agreed to serve a second five-year term. Fischer, who was Federal Reserve Chairman Ben S. Bernanke’s thesis adviser, helped ensure the stability of Israel’s banking system during the global financial crisis, and supported the Israeli economy by among others cutting interest rates as the recession unfolded and raising them when it ended.
BRAZIL GIVES FINAL APPROVAL FOR ISRAEL-MERCOSUR FTA
“Israel is known for its strong capabilities in technology and science. Thus, we encourage intensive cooperation with Israel.” – President Luiz Inácio da Silva
Brazilian President Luiz Inácio (Lula) da Silva gave Israeli President Shimon Peres his final approval for a free trade agreement between Israel and the Mercosur bloc (Brazil, Argentina, Uruguay and Paraguay). Israel is the first country outside South America to implement a free trade agreement with the bloc.
“We hope to advance economic and business ties between Israel and Brazil as trade has increased significantly between our two countries in the past few years,” President Da Silva said. “I am launching a new investment plan in Brazil soon and I invite Israeli companies to take an active and significant part.”
Israeli Minister of Industry, Trade and Labor Binyamin Ben-Eliezer and his Brazilian counterpart Minister of. Development, Industry and Foreign Trade Miguel Jorge, also signed a joined declaration ensuring the cooperation of their respective offices in resolving any impediments to trade between the two countries.
Brazil is Israel’s largest trade partner in Latin America. The approval of the agreement is expected to significantly boost trade, especially in the sectors of agriculture, education, medicine, and aerospace as well as reinforce the mutual investments by both countries.
Mercosur members produce over $3 trillion in GDP annually, and have a combined population of over 270 million.
ISRAEL’S PERRIGO ACQUIRES LEADING INFANT FORMULA MAKER
Over the counter drug maker Perrigo Company is acquiring privately held PBM Holdings Inc, a store-brand baby food manufacturer, for about $808 million in cash to expand its presence in infant formula and baby food.
The acquisition of PBM adds another growth engine for Perrigo, which already has a 75% share of the store brand over the counter (OTC) drug market in the US. Since 2003 the global market for children’s nutrition and infant formula products has nearly doubled reaching about $23 billion in 2009.
Gordonsville, Virginia-based PBM manufactures and distributes over-the-counter store-brand infant formula and baby foods sold by retailers in the mass, club, grocery and drug channels in the United States, Canada, Mexico and China.
AMDOCS BUYS LEADING UK MOBILE COMPANY MX TELECOM
Billing software company Amdocs has acquired mobile payments and messaging firm MX Telecom for $104 million in cash. MX Telecom provides connectivity and infrastructure, as well as facilitating payment and digital content delivery.
The British mobile payments and messaging aggregator will become part of Amdocs’ OpenMarket US mobile transactions hub.
OpenMarket provides a set of payment, messaging and emerging services that allow businesses to expand their marketing initiatives by leveraging the mobile channel. The joint OpenMarket-MX Telecom business will provide a hosted platform to extend mobile payment and messaging capabilities through an integrated network and product portfolio.
Amdocs is an Israeli founded provider of software and services for billing, customer relationship management (CRM) and operations support systems (OSS).
WARREN BUFFET’S BERKSHIRE HATHWAY UNIT TTI BUYS ISRAEL’S NET AYE
“Israel has been an important market for TTI for many years due to its significant growth in high-tech and the electronics industry.” – TTI CEO and president Paul Andrews.
Electronics components maker TTI Inc, a Berkshire Hathaway company, bought Net-Aye Technologies Ltd., a leading specialized interconnect and LED distributor located in Kfar-Saba Israel.
The management team will remain in place and will report to TTI President and CEO Paul Andrews, during the 2010 transition. Net-Aye is a subsidiary of Bar-Tec Ltd. and was founded in 1998.
TTI distributes passive, interconnect, electromechanical and discrete components to electronic manufacturers worldwide. Headquartered in Fort Worth, Texas, TTI has over 30 branches throughout Europe and Asia in addition to its 25 branches in North America.