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Rand’s investment yields profit of $8.3 million in Binoptics deal

Rand Capital Corp.’s payday from its investment in an Ithaca electronics company will top $8 million. The Buffalo venture capital firm reaped its biggest payoff ever from one of its investments when Binoptics, a company that makes lasers used by the semiconductor industry, was acquired this fall for $230 million.

For Rand, which owned a 4 percent stake in Binoptics, the deal means that its investment in the company will yield an $8.3 million profit – the biggest gain from a single deal in the company’s history.

Rand invested $1.8 million three years ago to acquire its stake in Binoptics. Last month, with Binoptics’ sales and profits hitting record highs in recent quarters, the company agreed to be acquired by a Massachusetts electronics maker, M/A-COM Technology Solutions Holdings, for $230 million.

The acquisition valued Rand’s stake in Binoptics at $10.1 million. After deducting the cost of its investment, Rand will earn a return that is 5½ times its investment in the company.

The Binoptics acquisition will leave Rand with plenty of cash that it can use to fund future investments. The venture capital firm now has about $13 million in cash on its books, more than double its cash holdings at the end of September. That’s equal to about $2 in cash for every share of Rand stock – money that Pete Grum, the company’s president, said can be used for future investments.

“Our focus remains on finding companies with strong management teams that need capital for early market entry or expansion in order to commercialize a new or unique product or service,” he said.

Rand also has been using its cash to buy back its own stock throughout the past year, mainly because the shares trade at about a 17 percent discount from its current price of $3.73 per share, based on its net asset value of $4.47 per share at the end of September, even before booking the profit from the Binoptics deal. The profit from the Binoptics deal will increase Rand’s net asset value by more than $1 per share.

Rand already has bought back nearly 28,500 shares of its stock this year and has permission from its board of directors to repurchase as many as 1 million shares through October 2015.

Rand’s profit from the Binoptics deal tops the $6.25 million that it made from its investment in Buffalo health insurance exchange operator Liazon earlier this year after it was acquired by Towers Watson.

Binoptics had grown to be the second-biggest investment in Rand’s portfolio, accounting for slightly more than 10 percent of the Buffalo venture capital firm’s net assets as of the end of September.