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South Florida Tech Firm CyberGuard Bought for $295M

Posted on: Friday, 19 August 2005, 21:00 CDT

Aug. 19--CyberGuard Corp., one of South Florida's largest tech companies, said Thursday it is being purchased for $295 million in cash and stock by Secure Computing Corp. of San Jose, Calif.

The deal will not result in layoffs at either of the tech security firms in the short term, and CyberGuard will continue to operate from its Deerfield Beach headquarters, said Steve Miller, Secure's vice president of worldwide marketing.

But Secure wouldn't rule out the possibility that headcount will be reduced at some point after the deal is completed. "We'll look carefully at everything," Miller said. Secure has 380 employees and CyberGuard has about 280.

The companies expect that the deal, which must be approved by shareholders of the two companies, will be completed by mid-November. The companies' combined annual revenues are about $200 million.

Eventually, the CyberGuard name will probably be dropped, and the entire company will be known as Secure Computing, Miller said. That would mark the end of a name that has been prominent in South Florida tech circles since 1994, when CyberGuard was incorporated as a spin-off of Harris Corp.

The acquisition also means one fewer tech company will be based in South Florida. Though the area is home to hundreds of small firms -- many of which are thriving -- the only major tech business based in South Florida is Fort Lauderdale-based Citrix Systems Inc., which has about 3,000 employees.

Secure's bid comes a little more than a year after CyberGuard made a failed 1-to-1 stock offer, valued at $297 million, to buy Secure. That offer was rejected by Secure's board, which said the deal was not in the company's best interests.

"That was a case of a much smaller company buying a much larger company," Miller said. "It just didn't make sense." Secure's market capitalization is $396 million, compared to $244 million for CyberGuard.

On Thursday, Secure's shares on the Nasdaq stock market declined $1.31, or 10.8 percent, to $10.87. CyberGuard rose 9 cents, or 1.1 percent, to $7.95.

Pat Clawson, CyberGuard's CEO, said the deal would improve the combined company's products in the tech security sectors known as unified threat management, secure content management and authentication. Secure said the deal would also help its Web filtering business.

Major competitors to the combined company include Cisco Systems, Check Point Software Technologies, Symantec and Websense.

The deal will be 70 percent stock and 30 percent cash. Secure said it would issue half a share of its common stock and $2.73 in cash for each outstanding share of CyberGuard stock. CyberGuard shareholders will control about 28 percent of the combined company's shares.

Based on average closing prices for early August, the offer represents a 16 percent premium to CyberGuard's shareholders, Secure said in a statement.

As part of the deal, Richard Scott, CyberGuard's largest shareholder, will join the board of the combined company.

In a related transaction, equity firm Warburg Pincus said it would invest $70 million in Secure, assuming the deal with CyberGuard is completed.

Meanwhile, CyberGuard on Thursday reported revenues of $17.2 million for the quarter ending June 30, a 19 percent increase from the same quarter a year earlier.

But the company also reported a net loss of $464,000 for the quarter compared to net income of $375,000 for same period in 2004.

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CGFW, SCUR, HRS, CTXS,

Source: South Florida Sun-Sentinel

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