US private equity fund Franciso Partners is set to acquire 50% of Israeli company R2Net at a valuation of $300 million. R2Net operates the James Allen website selling jewelry, and diamonds and other gems. Venture capital fund Israel Growth Partners (IGP), run by Moshe Lichtman and Haim Shani, which currently owns 25% of R2Net, is slated to sell all of its shares in the deal for $75 million. IGP bought its stake in R2Net in February 2014 for $25 million, making its profit on the investment $50 million. IGP is the only fund to have invested in R2Net.
James Allen, managed by R2Net, the first company in which IGP invested, is the second largest ecommerce platform in the US for diamonds and jewelry for events such as engagements, marriages, births, etc.
R2Net founder and CEO Oded Edelman comes from an family of Israeli diamond traders. He founded Internet company Daronet, then later integrated off-line and online commerce in R2Net, which has its main office in New York and its development center in Herzliya.
The other half of the stake being acquired by Franciso Partners is from Edelman.
R2Net is incorporated as an Israeli company, but its controlling shareholder is a company incorporated in New York, and the distribution of its ownership is therefore unknown. In addition to diamond trading, R2Net provides ecommerce services to the Sears retail chain, and has a cooperative venture with Signet, the world's largest jewelry retailer, which has 3,500 stores.
R2Net began doing business before Lichtman and Shani invested in it, and acquired two companies: Segoma, which developed diamond imaging technology, for $18 million, and Brio Animation Studios, which specializes in augmented reality.
The diamond industry is based on a few giant mining companies selling raw diamonds for processing. The wholesalers then distribute the diamonds to the retailers. R2Net connects small suppliers on 47th Street in Manhattan, many of whom are Jewish, with stores throughout the US.
Founded in 2014, IGP has raised $250 million to date. It invests in Israeli growth companies, and has invested over $100 million to date. It aims to turn growth companies into substantial ones suitable for IPOs or acquisition. IGP has invested in seven companies to date: Optimove, ColorChip, R2Net, Panaya, GreenRoad, Valens Jacada, and Earnix. Panaya was sold two years ago for $230 million to Indian software firm Infosys, while Valens Jacada and ColorChip today announced substantial financing rounds. The main investor in IGP is Leumi Partners Ltd., the investment arm of Bank Leumi (TASE: LUMI).
Published by Globes [online], Israel Business News - www.globes-online.com - on April 6, 2017
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