Calgary’s Circle Cardiovascular to be sold to Thoma Bravo for $213 million, taking IPO ‘off the table’ for years: CEO

Greg Orgrodnick, CEO of Circle Cardiovascular Imaging, one of the stars in Calgary’s technology sector.handouts

One of the stars of Calgary’s technology sector, Circle Cardiovascular Imaging Inc., is being acquired by US private equity giant Thoma Bravo LP for $213 million.

Circle briefly flirted with the idea of ​​going public last fall, before the sell-off in tech stocks changed those plans. With a new financially strong owner able to fund acquisitions and the prospect of persistently lower valuations for tech companies as interest rates rise, an IPO is “off the table for a couple of years,” said Chief Executive Officer Greg Ogrodnick.

“We’re very glad we didn’t go public given what happened to technology companies that are listed on the TSX,” he said, along with all but one of the 16 that listed on Canada’s last year Senior Exchange, Toronto, went public trading below their issue price.

“Although a successful IPO would have given us the cash in the bank to execute our business plan, the currency of our shares certainly wouldn’t have been there to get us where we wanted to go.”

Carl Press, a partner at Thoma Bravo, was not available for an interview but told industry magazine PE Hub that Circle will grow both by expanding sales of its existing products and by acquiring others in its space. His firm typically holds investments for at least three years before selling or listing them. “We still have a long way to go before we consider exiting,” said Mr. Press.

Circle is one of a number of fast-growing Calgary technology companies including Benevity Inc., Neo Financial Technologies Inc., RS Energy Group, Solium Capital, Symend Inc., Reach Ltd. and Helcim Inc., which have attracted outside investment and created jobs and hope for local economic diversification during a prolonged downturn in the oil and gas sector in recent years.

The 190-employee company makes software used in cardiovascular magnetic resonance imaging or MRI scanners to read, analyze and organize images used by cardiologists in evaluating patient action plans.

Circle’s artificial intelligence-based software has become the standard carrier of imaging software for cardiologists worldwide: more than 1,500 hospitals in 50 countries use their software, including all of the top 10 rated hospitals in the world, led by the Mayo Clinic, Cleveland Clinic and Massachusetts General Hospital . Circle hopes to shift more imaging from other methods, like nuclear imaging, to MRI machines.

The product will be sold direct to hospitals, replacing the software that comes with their MRI machines, and will be marketed with new machines from giants General Electric and Siemens. Circle generates over $30 million in annual revenue, growing approximately 30 percent.

Circle was co-founded in 2008 by Mr. Ogrodnick, a veteran healthcare entrepreneur, and Matthias Friedrich, a German cardiologist recruited to start the cardiac MRI program at the University of Calgary. Their goal was to develop cardiovascular imaging software that was superior to programs that came preloaded on MRI scanners and that would reduce the number of misdiagnoses that made one in five heart surgeries unnecessary, redundant, or ineffective.

Using AI trained on images from multiple heart centers, Circle automated parts of the process, organizing, reading and presenting images in a way that significantly reduced the cardiologists’ time and effort in their work. A 2019 study in the medical journal Circulation: Cardiovascular Imaging found that Circle’s software not only matched the accuracy of human researchers, but also got the job done 186 times faster.

Mr Ogrodnick declined to discuss the terms of the deal and Thoma Bravo did not disclose the value. However, the amounts were disclosed in documents filed last week with the Court of Queen’s Bench of Alberta, which, along with two-thirds of Circle shareholders, must approve a plan of arrangement for the transaction.

Management’s proxy circular shows that holders of Circle’s 9.5 million Class A preferred shares will receive $7.22 per share, while holders of 17.36 million common shares and 4.81 million options 6, $49 or $6.55 each. Investors Kayne Anderson Capital and Yaletown Partners, along with a handful of executives including Mr. Ogrodnick, will take proceeds worth $16.4 million in shares of the recapitalized company.

The deal represents a solid return for Kayne and Yaletown, who together invested $16 million in 2018 and $10.6 million last September. You will receive $74.1 million in cash plus $11.2 million in stock. Investors will vote on the deal on April 14.

“We are pleased with the return that our investors and our limited partners are receiving,” said Yaletown partner Hans Knapp. “I think it’s an excellent handover point to a very experienced, experienced investor.”

Thoma Bravo is one of the world’s largest private equity firms with more than $91 billion in assets under management. The US company, with offices in Chicago, Miami and San Francisco, has also supported Canadian technology providers Cority Software Inc. and PDFTron Systems Inc.

AGC Partners and Osler, Hoskin & Harcourt advised Circle, while Kirkland & Ellis and McMillan provided legal advice to Thoma Bravo. Financing is provided by Deutsche Bank.

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