Start-up cVidya acquires ECtel for $21m

The story of ECtel could have had a different ending, being acquired by a global telecommunications solutions provider.

In a twist on the normal exit strategy, telecom revenue management start-up cVidya Networks Inc. is acquiring integrated revenue management solutions developer ECtel Ltd. (Nasdaq: ECTX) for $21 million in cash. As is the case with so many Israeli companies, the story of ECtel could have had a different ending, being acquired by a global telecommunications solutions provider. Alternatively, it could have gradually failed and closed up shop. Instead, it found an exit.

However, ECtel has not been profitable for years, although it came close to breaking even in the second quarter of 2009, despite a 15% drop in revenue compared with the corresponding quarter of 2008.

cVidya will acquire ECtel for $1.26 per share, a 58% on its average closing share price for the 90 days through October 21. ECtel's share rose 18% on Nasdaq on Friday to $1.22, giving a market cap of $19.9 million.

"Globes" reported that the companies were in talks three months ago. The deal is due to be closed within two months, after which ECtel will be delisted.

cVidya will have to put only about $7 million for the acquisition, since ECtel has $14 million in cash.

Nochi Dankner-controlled IDB Holding Corp. Ltd. (TASE:IDBH) units Clal Electronic Industries Ltd. and Koor Industries Ltd. (TASE:KOR), which jointly own 38% of the company will vote in favor of the deal

cVidya's shareholders are Battery Ventures, Carmel Ventures, Hyperion Israel Fund, Plenus Venture Lending Fund, Star Ventures, and Stage One Ventures.

ECtel chairman Yair Cohen said, "At the board we evaluated our strategy going forward and, while evaluating the opportunities, we also recognize the challenges of continuing the path as an independent public company operating in a competitive and consolidating market that is limited in its size.

ECtel president and CEO Itzik Weinstein noted that the merger brought together two key players in the industry, which would enable the unified group to expand its product offering, customer base, and geographic breadth.

cVidya president and CEO Alon Aginsky said, "This strategic acquisition marks another significant milestone in our growth strategy of expanding our foothold in the communication, media and entertainment markets, by creating the largest and most innovative company in the world offering revenue management, fraud management, dealer management and clearinghouse services."

Published by Globes [online], Israel business news - - on October 25, 2009

© Copyright of Globes Publisher Itonut (1983) Ltd. 2009

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