U.S., Israeli nanoparticle makers merge their metals and markets

Oct. 30, 2002 — While the science of nanotechnology is all about making things smaller, the business may be all about expansion.

That theory seems to be driving the formation of Cima NanoTech, a new Woodbury, Minn.-based company formed via the merger of the nanotechnology division of Minnesota-based Aveka Inc. and NanoPowders Industries of Ceasarea, Israel. Pending final merger approval by the end of the year, Cima NanoTech officials are drumming up additional venture capital and expect to bring metal nanoparticles to market by the first quarter of 2003.

Jon Brodd, the new chief executive of Cima NanoTech, is the former president of Aveka, and prior to that was a senior executive at 3M International New Business Development. Aveka was formed in 1994 as a spinoff from 3M’s Corporate Research Group on Particle Processes. Willie Hendrickson, Aveka founder and chief executive, will be a Cima NanoTech technical adviser and board member.

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The new company inherits more than five years of development experience in the metal nanoparticles field, and Brodd said it will be first to market with 100-kilogram packages of the particles. The merger, he said, will increase Cima NanoTech’s intellectual property portfolio, help scale manufacturing and give it instant access to global markets.

Cima’s primary products will be transparent conductive coatings and conductive inks for the electronics market, implantable conductive components and leads for the medical market and aluminum-based rocket propellants and explosives for the transportation and defense industries. The company forecasts a global market of more than $9 billion for these products.

Brodd says the new company marries Aveka’s history of development in aluminum particles with NanoPowders’ expertise in silver and copper.

NanoPowders currently holds two patents in nanoparticles production — one for a process to create pure and alloy metal powders of silver, gold, nickel and copper at particle sizes ranging between .05 and 5.0 microns, and another that uses metal salts decomposition to create similar powders with high crystallinity and low surface area. Aveka’s metallic nanoparticles research and production has been focused on metallic inks, catalysts, energetic or conductive materials and compounds for use in batteries. In addition to NanoPowders’ two patents, Cima NanoTech will inherit nine other patent filings, with Brodd promising more to come.

Conductive inks will be Cima NanoTech’s first commercialized product, set to debut in Europe in the first quarter of 2003.

Neil Gordon, a partner at nanobusiness consulting firm Sygertech of Montreal and president of the Canadian NanoBusiness Alliance, said that while the merger makes sense on at least a couple of levels, the new company faces several challenges.

“A positive is you have two companies going after the lowest hanging fruit,” Gordon said. “These products [metal nanoparticles] can be brought to market within 12 to 16 months. The challenges are going to be in product marketing and the sales force. You have to find the right holes for these products to fit into. They will be used in other products, so in a sense you are selling to your customers’ customers.”

Aveka brings the new firm access to financial markets and manufacturing expertise, Gordon added. “Their products and technology came from 3M, so that will help,” he said.

Cima NanoTech will also proceed with the construction of a new nanometals manufacturing facility in Rushford, Minn., announced by Aveka this past spring. The company will be a U.S. corporation with a wholly owned subsidiary in Israel, something that Gordon questions, at least in part. “If they’re trying to get into the European market, Israel is not the place to be, just like being in Iowa is not the place to be for the U.S. market. But hopefully they have the resources to get these products to the companies that will want them. Also, when you have 40 people working on different products, you will have to merge that across two different parts of the world.”

But Harlan Jacobs, a venture capitalist and president of high-tech incubator Genesis Business Centers Ltd., who helped bring the two companies together, says Cima NanoTech already has ready markets for what it will produce.

“We are not talking pie-in-the-sky nanobots or making structures from diamond films,” Jacobs said. “People need to see how you can actually make money with this stuff. They [Cima NanoTech] are making little particles that they are actually selling. They have long-standing contracts with 3M, they are selling to the Air Force for rocket propellants. These are real people doing real things.”

The combined company will start with 21 employees and is working on raising $5 million in equity financing. Brodd is aiming for an IPO in 2007 with a target of more than $100 million in worldwide sales.

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