Private equity group CVC sought to keep quiet an investment in an Israeli defence company because of concerns it would attract controversy, only disclosing the deal to fund investors rather than announcing it publicly.
The Dutch-listed firm has agreed to buy a 40 per cent stake in camouflage maker Fibrotex from the company’s founding Blum family for about €250mn, according to people familiar with the matter. Adi Blum, a veteran of the Israel Defense Forces, will remain invested in the company.
CVC’s German team, which led the investment by its mid-market Catalyst fund, had been speaking to Adi Blum for years ahead of the deal being agreed, the people said. But unusually, CVC decided against announcing the investment through a press release and has instead only informed investors in the fund about the transaction.
The private equity group was seeking to keep the deal under the radar because of sensitivities associated with investing in the Israeli defence sector in the current environment, the people said.
In the investor communiqué, the buyout firm avoided any mention of the company being Israeli, despite it being based in Petah Tikva in Israel, according to the group’s website.
Instead, CVC described Fibrotex as a global business with a presence in the US, Japan and Australia “among others,” the people said. Most of Fibrotex’s revenues are generated abroad, with only a small percentage coming from its home market, some of the people said.
The transaction is the largest of the five deals signed through the Catalyst fund. The other four, which included a cyber security firm, prosthetic maker, online property rental platform and consulting firm, were all announced.
After the FT contacted CVC, the buyout firm acknowledged that Fibrotex had “principal locations in Israel and the US” from which it served “a highly international customer base across more than 20 countries”.
It added that “CVC Catalyst is delighted to have agreed to acquire a minority stake . . . CVC Catalyst will support Fibrotex’s continued international expansion and innovation against a backdrop of long-term defense modernisation and growing security requirements”.
Fibrotex did not immediately respond to a request for comment.
The deal comes at a sensitive time for European-Israeli relations. The UK, alongside France and Canada, last month announced an import ban on goods and some services linked to Israeli settlements in the occupied West Bank.
Israel has become increasingly isolated over the war in Gaza and growing settler violence against Palestinians in the West Bank, making any investments in the country’s defence sector potentially contentious.
“There is always controversy when it comes to investing in Israel, however controversy does not make the investment inherently wrong,” said Naaguesh Appadu of the M&A Research Centre at Bayes Business School in London. “LP and employee backlash is a genuine risk,” he added.
LPs, also known as limited partners, are the investors in private equity funds.
Investors have been piling into defence assets since the full-scale invasion of Ukraine, and Europe stepped up efforts to re-arm itself.
One investor in the CVC Catalyst fund said they judged defence investments on whether they were for companies making non-combat materials or actual weapons.
Fibrotex has been making camouflage systems for armies and special forces since 1965, including cover for soldiers, vehicles, aircraft and boats in woodlands, deserts and snow, according to its website. Its products can help evade radar and thermal camera detection.
The buyout firm stressed that Fibrotex’s products were used to “protect personnel and critical assets by reducing their detectability”.
The Israeli company says it uses experience of former combat unit and special forces soldiers as well as chemistry and physics engineers to develop its products. Israel’s battle-tested military sector has what is regarded as some of the best technology in the world, making it attractive for some investors.
Israeli newspaper Calcalist reported in April that Fibrotex had hired US investment bank Jefferies to sell a stake at a valuation of about $1bn.