CA buys security firm Netegrity

Rethink IT, Nov, 2004

Computer Associates International has agreed a deal to buy Netegrity, a provider of security software, in an all cash merger valued at approximately $430m or $10.75 per fully diluted common share.

Since Netegrity holds about $89m in cash and investments, this means the deal will cost CA around $341m. The price is around a 44% premium on the company's share price.

The acquisition is subject to customary regulatory approvals and the approval of Netegrity's shareholders, and is expected to be completed in the next 90 days. Stockholders representing approximately 10% of the outstanding Netegrity shares have executed voting agreements pursuant to which they have agreed to vote in favor of the transaction.

"CA continues to move forward and align its resources and investments with the company's strategic growth opportunities: internal development, geographic expansion, new routes to market and acquisitions," said CA's chief executive officer Kenneth Cron. "By adding the best web security product on the market to its portfolio, CA significantly strengthens its leading position in identity and access management (IAM). Security continues to be critically important to CA, and we will ensure that we offer customers the broadest and deepest IAM suite in the industry."

The acquisition is expected to be neutral in fiscal 2005 and slightly accretive in fiscal 2006.

Netegrity's operations will be integrated with CA's eTrust Identity and Access Management group. CA is currently evaluating cost efficiencies associated with the integration. It is anticipated that the vast majority of Netegrity's approximately 400 employees will remain with CA.

In addition to its market-leading access management solution for web-based and enterprise applications, SiteMinder, Netegrity also offers TransactionMinder, the industry's first policy-based solution to secure access to Web services; IdentityMinder Web Edition, a flexible, roles-based user administration and access management solution for web-based applications; and IdentityMinder eProvision, a comprehensive solution for creating, modifying and terminating identity-based access to enterprise systems and physical resources.

It's a bit of a shock that CA should be making acquisitions so close to the recent departure of its CEO and while an interim CEO is in place. This reeks of pressure from behind the throne, with financiers driving the strategy. Perhaps Barry Bycoff, the CEO at Netegrity is expected to become a key member of the CA leadership.

We have said before that all the ruthless element of the previous corporate culture at CA has now been weeded out, and the vultures will certainly be circling, and this may well be a move to effectively shuffle the management pack.

They could do worse than trust at least some leadership to Bycoff. He was named Ernst & Young's 2001 New England Entrepreneur of the Year and Netegrity was recently named the 'Best 3-Year Performer' in The Wall Street Journal's annual Shareholder Scoreboard one of Forbes Magazine's Best Managed, Fastest Growing Companies and one of Bloomberg's 100 Fastest Growing Companies.

Netegrity was valued at 3.3 times its $90m revenues before the deal was struck.