Few big winners in Cadent sale

Shmulik Shelach

Notwithstanding the high $190 million that Align Technologies paid for Cadent, the exit is in fact rather middling.

Notwithstanding the high $190 million that Align Technologies Inc. (Nasdaq; ALGN) paid for Cadent Holdings Inc., the exit is in fact rather middling. The proceeds will be divided among a large number of shareholders, who reportedly invested almost $120 million in the company.

The bulk of the investment - $110 million - was in cash, and the rest was loans. In absolute terms, the return is 1.7 times the investment. In terms of time and the quantity of investors, this is a highly dubious achievement.

In such investments, it's all a question of timing. The big winner is private equity fund Fortissimo Capital, run by managing partner Yuval Cohen. It will get back $30 million, a threefold return on its investment, within two years. The internal rate of return is 120%.

After Fortissimo, Cadent's largest shareholder is JPMorgan Partners, which owns 10-15% of the company, and will receive $20-30 million. Since it was an early investor in the company, its financial return will be less impressive.

Apax Partners will apparently not see a positive return on its investment in Cadent, and will at best break even. According to Israel Venture Capital Association (IVC), Apax has supported the company since its first financing round, and now owns 10% of it.

Star Ventures is another prominent investor, which led a large financing round in Cadent in 2005. It no longer has the large stake it had at the time of the investment, due to subsequent dilutions.

Pitango Venture Capital is another longstanding investor. It decided to stop injecting additional capital into Cadent, and saw its holding diluted. Pitango only owns a few percent of the company, and it is doubtful its share of the sale proceeds will result in a return on investment, in absolute terms. It is hard to add this deal to the list of Pitango's successes of the past two years.

In addition to the institutional investors, at least one Cadent founder will see a return: CTO Avi Kopelman, who owns 1% of the company, and will make an estimated $1-2 million.

Published by Globes [online], Israel business news - www.globes-online.com - on March 30, 2011

© Copyright of Globes Publisher Itonut (1983) Ltd. 2011

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