Strauss Group Ltd. (TASE:STRS) today announced that its subsidiary, Strauss Water, had exercised its right under its agreement to increase its holding in Qingdao HSW Health Water, a joint venture in China, by 15%, bringing its holding in the venture to 49%. This move, which began with a business restructuring in 2015, has culminated in the completion of the acquisition.
Strauss will pay its partner, a Haier group company, NIS 78.3 million within 90 days for the shares. The price was set according to a valuation formula based on the joint venture's 2016 financial results, as stipulated under the agreement. Strauss will pay for its stake with an owners' loan granted by the company to Strauss Water.
Strauss Group president and CEO Gadi Lesin said, "Through Strauss Water, the Strauss Group is reinforcing its presence in the private sector water market in China. This market, one of the world's largest, has an especially high potential. This step comes on top of other steps we have taken in recent months, including the purchase of a minority share in a water company and a coffee company and the sale of Max Brenner. It fits in with the group's strategy of reinforcing its investment in its business, while strengthening the connection with its partners in the group's partnerships."
The joint venture develops, installs, sells, maintains, treats, and purifies water supplies. The joint venture's 2016 sales turnover totaled NIS 352 million. Its sales doubled from NIS 59.2 million in the first quarter of 2016 to NIS 117.9 million in the first quarter of 2017. The venture's net profit reached NIS 30 million in 2016, and grew from NIS 6.1 million in the first quarter of last year to NIS 9.5 million in the first quarter of 2017, a 55% jump.
The Chinese home water purifier market, in which the joint venture operates, totals an estimated $6 billion a year, making it one of the largest in the world. Growth rates in recent years have far exceeded 10% annually, and this trend is projected to persist in the coming years, supported by growing use of the filtration and purification solutions sold by the venture in China by families , instead of conventional solutions such as boiling water in kettles and drinking from filtered water jugs.
Strauss signed the partnership agreement with Haier in late 2010, and launched the first products in the joint venture framework in late 2011. The joint venture currently markets a wide range of products based on tap water purification technology in China, including Maze technology, which has not existed in Israel up until now.
"Globes" recently revealed that the company had begun a pilot for use of purifiers using the technology in Israel, which will make it possible for the first time to filter out heavy metals in water, including lead.
Published by Globes [online], Israel Business News - www.globes-online.com - on May 29, 2017
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