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McClatchy-Tribune  05/13/2014 12:01 AM ET
Solar water systems co Chromagen aims for IPO [Globes, Tel Aviv, Israel :: ]

May 13--Sources inform "Globes" that solar water heater manufacturer Chromagen is examining the possibility of an IPO. This would be on the basis of its financials for the first or second quarter of 2014. It is believed that the company intends to raise NIS 30-50 million, at a valuation of NIS 150-200 million, before the money.

Chromagen is controlled by Kibbutz Sha'ar Ha'amakim (68%) and the Tene fund (32%). It was founded in 1962, and is managed by Adar Azancot. Company chairman is Reuven (Robert) Avi-Tal.

As mentioned, Chromagen produces thermo-tanks and solar collector panels. It has two factories: one, at the kibbutz itself, makes the tanks, while the other, in the Tsiporit industrial zone, makes the collectors. Altogether, Chromagen employs about 200 people, and is estimated to have annual turnover of close to NIS 200 million.

In 2010, the company distributed a dividend for the first time, amounting to NIS 3.5 million, after turnover surpassed NIS 200 million in 2009 and profit reached NIS 10 million.

The sequel, however, was a little less successful. Chromagen signed an agreement with A.O. Smith, the world's largest thermo-tank manufacturer, under which it would be A.O. Smith's sole supplier of solar collectors in North America. At that time, tax benefits were available in the US for installing solar water heaters, and the expectation was that US consumers would switch to heating water by this method. Chromagen estimated the potential of the deal in the hundreds of millions of shekels.

In fact, the systems were costly in comparison with other water heating methods, and it required many regulatory permits in order to obtain a standard, and many bureaucratic obstacles had be overcome by customers before they received the tax benefit. So US sales amounted to only a few millions dollars. Chromagen currently sells its systems in Israel and in 35 other countries, with 60% of production going to export.

The Tene fund, which invested $5 million in Chromagen in 2006, was founded in 2005 by four partners: Dr. Ariel Halperin, Eyal Attia, Dori Brown, and Ran Ben-Or CPA. In the 1990s, Halperin headed the administration for the debt arrangement of the kibbutzim with the banks, and so was familiar with the industrial sector on the kibbutzim, which is where the fund focuses its investments. Among the investors in the fund are The Phoenix Holdings Ltd. (TASE: PHOE1;PHOE5), Migdal Insurance and Financial Holdings Ltd. (TASE: MGDL), the Mivtachim new pension fund, and Bituach Haklai, the kibbutz movements' insurance company.


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