The new Israeli fund, Tene's fourth, will focus on manufacturers of industrial exports.
The local private equity industry continues to raise huge amounts, thanks to the impressive returns it is generating for investors. Sources inform "Globes" that Tene Investment Funds Ltd. closed its fourth fund in recent days, having raised a total of $410 million. The fund is likely to invest in export companies, and will receive the usual 2% management fees for investment funds. i.e. $8.2 million a year. There are also management fees amounting to 20% of the profits above a threshold 8% return.
Tene, led by senior managing partner Dr. Ariel Halperin, is one of Israel's leading private equity funds. It specializes in investments in industrial companies. Its original focus was on kibbutz (collective settlement) industry. Among other things, the fund has invested in Netafim Ltd., Caesarstone Sdot Yam Ltd. (Nasdaq: CSTE), SCR, Chromagen, Gadot Chemical Tankers and Terminals, and Omen High Pressure Die Casting.
Before the current fund, Tene was managing $500 million in assets in three funds, and its portfolio contains companies from the three preceding funds. The new fund is Tene's largest: the first raised $60 million, the second $145 million, and the third $310 million.
Halperin told "Globes" today, "Tene's investment strategy will remain the same as it was in the previous funds. We're focusing on mature industrial companies with potential for development and growth outside Israel – that's an important point for us."
According to Tene's website, Israel has over 5,100 mature and growing industrial companies that account for over 45% of the country's industrial output. The fund is looking for established companies with export-oriented profits, and says that it adds a great deal of value to them.
Success with Netafim and Caesarstone
Another prominent investment by Tene was in Caesarstone Sdot Yam, which produces quartz surfaces used in kitchens and bathrooms, for example. The fund had a successful exit in 2013, when it sold its holdings in the company at a handsome profit, seven years after investing in it when it was a private company. Tene was the first external investor in Caesarstone, and led it to an IPO on Wall Street.
Tene's original investment in Caesarstone was $39 million, and it sold its holdings in the company for $186 million - a return of almost five times the original investment. Tene went back to investing in Caesarstone a year ago, buying 2.9% of the company from Kibbutz Sdot Yam for $43.5 million. Despite the small size of its holding, the fund has a shareholders' agreement with the kibbutz; together, the two entities own a third of the shares in the company, whose current market cap on Nasdaq is $1 billion.
Yet another successful exit by Tene was when it sold SCR, which manufactures cowshed management systems, three years ago to US company Allflex. Tene owned 51% of SCR, which was sold at an operating value of $250 million in cash (the debts of the sold companies were deducted from this amount). Tene first invested in SCR in 2009.
"When we started operating in 2004-2005," Halperin previously told "Globes," "there were many opportunities in kibbutz industry. There is no doubt that this initial plan by Tene relied on familiarity with the kibbutz sector, a knowledge of quite a few industries, and opinion makers in the kibbutz sector."
Was this because of your previous job, in which you were in charge of the kibbutz debt settlement?
Halperin: "I finished the job in 2000, and Tene made the investment five years later, so there was a fairly long period in the middle, but yes, a large part of this familiarity was gained during the period was when I was in charge of the settlement in 1992-2000.
At that time, when you began investing in kibbutz industry, it was much less acceptable than it is now.
"I can't say that Tene invented anything. What we did know was how to manage and close such investments, and we had the privilege of working with companies that achieved substantial growth and gains when we were in them."
Three founders – Halperin, Eyal Attia and Dori Brown – founded Tene in 2005. One of Tene's most prominent investments to date, through its first fund, was $30 million for 10% of kibbutz irrigation company Netafim in 2006. Control of Netafim was sold to Permira at a company value of $850 million, generating a 180% return in five years for Tene.