Network Associates Inc has acquired high-end security company Trusted Information Systems Inc in a stock swap valued at roughly $300m. NAI says the transaction has a fixed rate of 0.323 of its shares for the outstanding shares of TIS. That rate values TIS shares at about $20, a 59% premium over Friday’s closing price of $12.625. Network Associates, formed last year by the merger of McAfee Associates and Network General, says the deal makes it the largest security software company in the world, with revenues in excess of $650m. The TIS acquisition gives NAI a proven firewall technology – TIS’ Gauntlet product, which is second in sales only to that of CheckPoint Software Technologies Inc – to incorporate into its full security suite. Network Associates figures that the market for standalone firewall products will all but disappear in the next year and is banking on the full suite becoming standard fare. The purchase, coupled with the December acquisition of encryption specialist Pretty Good Privacy Inc (CI No 3,302), gives Network Associates a full range of products encompassing enterprise encryption, authentication, intrusion detection, anti-virus and firewalls. NAI also gets four technology patents, 50 sales professionals and, most importantly, inherits Trusted’s consultancy contracts with US Department of Defense. That part of the deal looks increasingly sweet as the DOD has decided to abandon its own security software efforts in favor of purchasing commercial products. TIS’ relationship with the DOD also gives the company a research and development facility which the federal government pays for. NAI says it’s too early to tell, but some job losses could result from duplication, mostly in the general and administrative areas. The acquisition will be accounted for as a tax-free pooling of interests and is not expected to be dilutive. The deal, which is subject to shareholder and regulatory approval, is expected to close in 60 to 90 days. NAI expects a modest second-quarter charge associated with the purchase. Trusted shares rose $6.6875, or 53% to close at $19.3125 on Monday. Network Associates shares slipped $0.50 to $62.
