Pretty funny.
Secure Computing to Acquire CyberGuard, Creating Leader in Unified Threat Management Market
Thursday August 18, 8:00 am ET
Transaction Expected to be Accretive in Second Full Quarter of Operations
SAN JOSE, Calif. & BOCA RATON, Fla.--(BUSINESS WIRE)--Aug. 18, 2005-- Global Private Equity Investor Warburg Pincus to Invest
$70 Million in Secure Computing
Secure Computing Corporation (NASDAQ:SCUR - News), the experts in securing connections between people, applications and networks(TM), today announced that is has signed a definitive agreement to acquire all of the outstanding common stock of CyberGuard® Corporation (NASDAQ:CGFW - News), a global provider of security solutions that protect the business-critical information assets of Global 2000 enterprises and government organizations.
Under the definitive agreement, Secure Computing will issue 0.5 shares of Secure Computing common stock and $2.73 in cash for each outstanding share of CyberGuard common stock. Secure Computing will distribute to CyberGuard shareholders approximately 16.5 million shares, which will represent approximately 28 percent of the outstanding stock of the combined company after the close of the transaction. Secure Computing also expects to assume all outstanding and unexercised options to purchase CyberGuard common stock which will be exercisable into approximately 3.2 million shares of Secure Computing common stock. Based on Secure Computing's closing price of $12.18 yesterday, the market value of the transaction is expected to be approximately $295 million on a fully diluted basis. Based on the average closing price for the 10 days ended August 16, 2005, for both companies, the offer represents a 16% premium to CyberGuard shareholders.
In conjunction with this acquisition, Richard L. Scott, a current member of CyberGuard's board of directors, will join Secure Computing's Board of Directors following the close of the transaction.
"The acquisition of CyberGuard will bring together two companies with highly complementary strengths and market synergies, and will allow us to accelerate our strong pace of success over these last few years," said John McNulty, chairman, president and CEO of Secure Computing.
"This transaction meets important strategic priorities and better positions Secure Computing in two of the fastest growing markets of the security industry," said McNulty. "By combining the companies, Secure Computing will be the leader in the Unified Threat Management market, the fastest growing segment of the IT security market according to IDC. It will also accelerate our ability to further penetrate the Secure Content Management market, and clearly positions Secure Computing as the number two player in web filtering with approximately 21.0 million licensed seats."
McNulty continued, "We believe the acquisition will be accretive to Secure Computing's earnings within the second full quarter of operations following the close of the transaction."
Pat Clawson, chairman and CEO of CyberGuard Corporation said, "the combination of Secure Computing and CyberGuard brings together two successful leaders in IT security technology that are among the most established players in this dynamic and evolving industry. Like Secure Computing, CyberGuard has built an excellent reputation in the market by delivering a suite of integrated information security solutions to Global 2000 enterprises and government organizations worldwide. Together, we will be able to offer customers the most advanced and robust security solutions for the Unified Threat Management, Secure Content Management and Strong Authentication markets."
In connection with this transaction, Warburg Pincus, the global private equity firm and a leading investor in technology companies, will invest $70 million in Secure Computing in the form of convertible preferred stock with warrants. The preferred stock will be convertible at $13.51 per share, representing an 11% premium to the closing price of Secure Computing's common shares on August 17, 2005, and will include a 5% dividend which shall be paid-in-kind for the first 4.5 years and thereafter may be paid in cash, at the option of Secure Computing. Warburg Pincus will also receive 1.0 million warrants to purchase Secure Computing common stock at a price of $14.74, representing a premium of 21% to the closing price of Secure Computing's common shares on August 17, 2005. The convertible preferred stock is not redeemable but may be converted to common at any time by Warburg Pincus and after one year by Secure Computing subject to the achievement of certain share price performance milestones. This investment will close concurrent with, and is contingent upon, the closing of the CyberGuard transaction.
"Secure Computing has an impressive history of delivering market-leading solutions in enterprise security, and has displayed a solid record of execution, growth, profitability and cash generation," said Cary J. Davis, a Warburg Pincus managing director. Davis, also will join Secure Computing's Board of Directors once the transaction closes, added, "We believe that the proposed combination with CyberGuard further enhances the company's capabilities and clearly positions Secure Computing as a leading global security solutions provider."
Acquisition Combines Two Highly Synergistic & Well Positioned Companies in the IT Security Industry
Benefits of the combined organization include:
Greater Scale with Larger Geographic Footprint
The combined company will benefit from a stronger and more attractive worldwide geographic footprint that includes 680 employees, more than 17,000 customers and 1,000 resellers in over 90 countries. Together, the company will be able to leverage its strengths and better serve the needs of its customers. And as a result, more opportunities will be created to cross-sell all of the company's innovative products -- including SafeWord and CyberGuard's SG Series -- to both current and prospective customers.
Both Secure Computing and CyberGuard also have strong OEM and channel partnerships with companies including Cisco, Blue Coat, Network Appliance, Dell, AT&T and Citrix. The combined company will continue to build and expand upon these important partnerships, which sell web filtering as an add-on to multi-function security appliances, Sidewinder G2 Security Appliances, the SG Series and SafeWord 4 products.
Expanded and Enhanced Product Portfolio
Secure Computing and CyberGuard bring unique and innovative technological assets to the combined company. Customers and partners of both companies will benefit by combining the two leaders in the application proxy firewall space. The best features and functions of both application proxy firewall products will be incorporated into a single technology offering and provide customers with the most advanced application proxy/deep inspection technology in the market.
The combined organization will also be better positioned to compete in the Secure Content Management market. The web filtering technologies are very complementary and round out an extensive web filtering product offering. This web filtering foundation coupled with CyberGuard's current Secure Content Management appliance offering and the combined engineering strengths will allow Secure Computing to accelerate solutions for this rapidly growing market.
More Capacity to Innovate with Larger Planning and Development Teams
The combination will significantly increase Secure Computing's development resources and once integration is completed, will allow for acceleration in the development of new and evolutionary solutions for the Unified Threat Management and Secure Content Management markets.
About the Transaction
Under the definitive agreement, Secure Computing will issue 0.5 shares of Secure Computing common stock and $2.73 in cash for each outstanding share of CyberGuard common stock. The proceeds from the financing with Warburg Pincus are expected to finance the cash portion of the merger. The merger is subject to the satisfaction of customary closing conditions, including the approval of CyberGuard's and Secure Computing's shareholders, and is expected to close during the fourth calendar quarter of 2005. Each company's executive officers and directors who are stockholders have agreed to vote in favor of the merger. The Warburg Pincus financing will not close unless the merger is completed. The foregoing summary is a general description of certain pricing and related terms contained in the definitive agreement for the transaction, and is qualified in its entirety by the definitive agreement, a copy of which will be filed by Secure Computing and CyberGuard with the Securities and Exchange Commission on Form 8-K. |
