Gemalto has signed a definitive agreement to acquire 100% of the share capital of SafeNet, a worldwide data protection provider, from Vector Capital for US$890 million. The deal is being done on a debt free/cash free basis.
Headquartered in Belcamp, Maryland, USA, and presently located in 27 countries, SafeNet works with digital information security companies that are trusted to protect, control the access to, and manage the world’s most sensitive data and high value software applications. As an example, SafeNet technology protects over 80% of the world’s intra-bank fund transfers and its more than 1,500 employees, including 550 cryptographic engineers, serve over 25,000 customers, both corporations and government agencies, in over 100 countries.
Customers utilising SafeNet solutions include Banamex, Bank of America, Cisco, Dell, Hewlett-Packard, Kaiser Permanente, Netflix, Starbucks and many more of the world’s best known companies. In 2013, SafeNet recorded revenues of US$337 million and profit from operations of US$35 million and expects revenues of US$370 million and profit from operations of US$51 million for 2014.
Gemalto is enters its 2014-2017 multi-year development plan as the digital world enters a period in which proper control over sensitive information is paramount. Nearly 400 million digital data records have been lost or stolen already in 2014, prompting a significant rise in global awareness regarding the effective protection of data. With this acquisition, Gemalto and SafeNet combine the best technologies, expertise and services available for securing a complete infrastructure: network, users, data, software, at the core and at the edge.
SafeNet provides an extensive portfolio of data protection solutions including HSM1 advanced cryptographic key management systems, encryption technologies for civilian applications, authentication servers and authentication as a service, as well as sophisticated software license management and monetisation solutions. As an example, HSMs are the essential cloud-based secure elements generating and protecting the fundamental cryptographic keys and processing units used by digital authentication, encryption and signature mechanisms within computer networks and the Internet.
All of these will, said Gemalto, “perfectly complement” its offering of embedded software and portable secure elements, which are used globally at the other end of the network security chain, such as in the users’ pockets and inside network-connected terminals.
Once the acquisition is completed, SafeNet will significantly reinforce Gemalto’s Identity and Access Management business. It will become part of Gemalto’s Payment & Identity segment, and its Platforms Services activity, that account respectively for €1,329 million and €715 million of the company’s 2013 pro forma revenue.
The purchase price of US$890 million is self-funded with US$440 million from available cash, and US$450 million drawn from existing long-term credit facilities. Depending on market conditions, Gemalto may refinance the credit facilities through a bond issuance or other means at a later date. The closing of the transaction is expected to occur in Q4 2014, after approval from the relevant regulatory and antitrust authorities. Gemalto has said that after the acquisition is completed it will retain a strong financial structure with a net debt/EBITDA ratio < 1. The transaction will be accretive to adjusted EPS (Earnings Per Share) before purchase price allocation upon completion.
As a result of the acquired business’s anticipated profitability, growth and synergies, Gemalto expects to surpass its 2017 profit from operations2 objective of €600 million by approximately +10%.
“The opportunity to acquire SafeNet has come at exactly the right time, as we have just entered into our new multi-year development plan and there is a perfect fit between Gemalto’s “security at the edge” and SafeNet’s “security at the core” capabilities. This will enable us to further accelerate the deployment of strong security solutions in the Enterprise sector, and expand our technologies and growth opportunities in protecting online access. Overall, our global leadership in digital security will be reinforced”, said Olivier Piou, Gemalto CEO.
“We are very excited for the opportunity to join Gemalto, which is recognised internationally for leadership in the digital security domain. Our products and routes to market are perfectly complementary and our visions for the future naturally intertwined,” said Prakash Panjwani, SafeNet president and chief executive officer.
“The combination of our portfolios will allow customers to have access to world’s leading security products for mobile and cloud, delivering best-in-class protection of data and identities. This transaction will accelerate the delivery of Gemalto’s security solutions to the Enterprise while also making SafeNet’s data protection solutions accessible to the Banking and Telecom sectors – truly a win-win for everyone involved.”
