Secure Computing Corporation has signed a definitive agreement to acquire messaging security company CipherTrust, Inc. CipherTrust, a privately-held company, provides layered security solutions to stop inbound messaging threats such as spam, viruses, intrusions and phishing, and protects against outbound policy and compliance violations associated with sensitive data leakage.

Secure Computing is purchasing CipherTrust for total consideration of 273.6 million, which is comprised of 185 million in cash, 10 million shares of Secure Computing common stock, and a 10 million seller note that is subject to certain performance obligations. As a result of the transaction, CipherTrust shareholders will have an approximate 14 per cent ownership position in Secure Computing.

Under the terms of the agreement, Secure Computing has obtained a commitment for a senior secured credit facility from Citigroup. The facility comprises a 115 million term loan and a 20 million revolving credit facility. The transaction is expected to close by September 8, 2006, subject to any necessary regulatory approvals and customary closing conditions.

Depending on the closing day of the transaction, Secure Computing expects CipherTrust to add approximately 15 million to 20 million in revenue in 2006, and approximately 80 million in revenue in 2007. The transaction is expected to be breakeven with respect to pro-forma earnings per share by mid-2007 and accretive to pro-forma earnings per share in the second half of 2007.

In conjunction with this transaction, Jay Chaudhry, CEO, chairman and founder of CipherTrust, will join Secure Computing's Board of Directors as Vice Chairman and serve as the company's Chief Strategy Officer and a member of the company's senior management team.

"Over the past few months, we have made excellent progress with the integration of CyberGuard," said John McNulty, chairman, president and CEO of Secure Computing. "With the brunt of the initial integration activity now behind us, we believe the time is right to continue investing in enterprise gateway security, which is experiencing strong growth. After an extensive review and due diligence process, we believe CipherTrust is the perfect addition to Secure Computing."

According to IDC, the Secure Content Management Appliance market is expected to grow to 1.7 billion in 2009, a 47 per cent CAGR from 2004 through 2009. In the Messaging Security sub-market, IDC expects this area to grow to 2.6 billion in 2009, a 31 per cent CAGR from 2004 through 2009.

CipherTrust is the current leader (based on 2004 revenues) in the Secure Content Management Appliance market with 20 per cent market share. Also as part of the transaction, Secure Computing will become well-positioned in the Messaging Security Market. According to IDC data, CipherTrust is currently the clear market leader in messaging security gateway appliances. Appliances are becoming the preferred method of deploying security applications within the Enterprise, and IDC estimates that 80 per cent of all network security solutions will be delivered via a dedicated appliance by 2007.

[This is not a surprising move. The fit seems perfect and with the integration of Cyberguard Secure Computing not only gained markets but also scarce top quality management resources. Secure Computing's acquisition policy looks intelligent, based on buying a combination of products, staff and new markets - and it looks like a company with good future prospects.

Perhaps the next step should be the acquisition of a really high-quality anti-malware producer such as e.g. Kaspersky Labs...

(Note: Your editor does not invest in the information security industry at all to avoid potential conflicts of interest). --Ed].

Related links: (Open in a new window.)
www.securecomputing.com
www.ciphertrust.com

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