Sources inform ''Globes'' that Yozma Venture Capital is in advanced talks to sell most of its 9% stake in website syndication solutions developer Conduit Ltd. for $200-250 million. The potential buyer is a large foreign investment firm that has tens of billions of dollars in assets under management.
Yozma acquired its stake in Conduit for $1.5 million in 2006, when the company was just starting out. "Globes" named the company as one of Israel's most promising start-ups in 2011.
Yozma's return on its investment of more than 200-times its money, or 20,000%, is extraordinary. Israel's venture capital industry has never seen such a return, even in its heyday of the late 1990s, which included the Chromatis Networks exit. The big winner in the Conduit sale will be Ofer Holdings Group unit Ofer Hi Tech Ltd., which owns 30-40% of Yozma. It invested $20 million in the Yozma III Fund and will make a handsome return on Yozma's sale of its Conduit stake, irrespective of Yozma's other investments.
Conduit is one of the most impressive Israeli companies in the current high-tech wave. The company value for the Yozma deal - $2.5 billion - positions it as one of Israel's most valuable high-tech companies of all time.
Conduit recently launched a rebranding, which includes a number of activities in addition to the toolbar for mobile and social networks. The company has also developed a platform that enables content producers to develop content applications in the same way as a toolbar.
In an interview a few months ago, Conduit chairman CEO Ronen Shilo said that the company had hundreds of millions of dollars in annual sales.
Despite Conduit's success, its investors, especially Yozma and Benchmark Capital, and its employees, will not benefit from the substantial value created by an exit, either through an IPO or sale. Shilo told "Globes", "I'm not taking the company to an IPO. I know that, in terms of venture capital, an IPO is a home run. But in the end, they can sell quite quickly leaving us on a stretcher. They'll get their chance to realize their asset."
As part of the effort to enable investors and employees to realize their profits in some way, Conduit distributed a $200 million dividend to shareholders and many employees.
The Yozma III Fund, which raised $50 million in 2001, is nearing the end of its life, and is trying to sell its holdings. It has an obvious interest is a sale, especially seeing that Conduit is a successful holding. The problem with a sale is the high valuation, and despite talks with several parties with the wherewithal, no sale may ultimately take place.
Shilo founded Conduit in 2005 together with Dror Erez and Gaby Bilczyk. The company's software platform enables content providers and advertisers to build, without effort, a toolbar that will strengthen the connection with the user, who adds to the toolbar to his or her browser.
Conduit had sales revenue almost from the day it was founded, through the various advertising options that its software provides. However, the search box included in the toolbar is the real driver behind its development. In 2006, Conduit became a partner of Google, and later of Microsoft, when the software giant sought to promote its Bing search engine.
Yozma managing partner Yigal Erlich declined to comment on the report.
Published by Globes [online], Israel business news - www.globes-online.com - on February 9, 2012
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