Cyberguard (NASDAQ:CGFW)
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Global Private Equity Investor Warburg Pincus to Invest
$70 Million in Secure Computing
Secure Computing Corporation (NASDAQ:SCUR), 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(R) Corporation
(NASDAQ:CGFW), 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.
Investor Conference Call
Secure Computing and CyberGuard will be hosting a joint 90 minute
conference call today, August 18, 2005, at 10:00 a.m. EDT (7:00 a.m.
PDT) to discuss the details of the acquisition and to review
CyberGuard's fourth quarter and fiscal 2005 results. To participate by
telephone, the dial-in number is 1-877-560-3200 and the conference ID
number is 7895959 within the United States. If you are calling from
outside the U.S., the dial-in number is 1-706-645-9750 and the
conference ID number is 7895959. The conference call will also be
available via live webcast on Secure Computing's Investor Relations
web site at: www.securecomputing.com.
About Secure Computing
Secure Computing (NASDAQ:SCUR) has been securing the connections
between people and information for over 20 years. Specializing in
delivering solutions that secure these connections, Secure Computing
is uniquely qualified to be the global security solutions provider to
organizations of all sizes. Our more than 14,000 global customers,
supported by a worldwide network of partners, include the majority of
the Dow Jones Global 50 Titans and the most prominent organizations in
banking, financial services, healthcare, telecommunications,
manufacturing, public utilities, education, and federal and local
governments. The company is headquartered in San Jose, Calif., and has
sales offices worldwide. For more information, see
http://www.securecomputing.com.
About CyberGuard Corporation
CyberGuard Corporation (NASDAQ:CGFW) delivers a suite of
integrated information security solutions to provide Global 2000
enterprises and government organizations with the confidence that
their critical information assets are protected. Based on the
company's Total Stream Protection framework and managed via its Global
Command Center, CyberGuard's products go beyond network-level security
to provide protection against the most dangerous application-layer
vulnerabilities and provide potential damage, securing the entire data
stream. With a growing and satisfied number of brand-name customers,
CyberGuard has deployed more than 250,000 products across the globe.
Headquartered near Boca Raton, Fl., the company has offices and
training centers around the world. For more information visit
www.CyberGuard.com.
About Warburg Pincus
Warburg Pincus has been a leading private equity investor since
1971. The firm currently has more than $10 billion under management
and an additional $8 billion available for further investments.
Warburg Pincus invests in a range of sectors including information and
communication technology, financial services, healthcare, media and
business services, energy, industrial and real estate. The firm has
invested $5 billion in 122 information and communication technology
companies including BEA Systems (NASDAQ:BEAS), NeuStar (NYSE:NSR),
ScanSoft (NASDAQ:SSFT), UGS and VERITAS Software (recently acquired by
Symantec). An experienced partner to executives seeking to create and
build durable companies with sustainable value, Warburg Pincus has
offices in North America, Europe and Asia and an active portfolio of
more than 100 companies. For more information, please visit
www.warburgpincus.com.
Additional Information about the Proposed Merger and Where to Find
It
Secure Computing intends to file a proxy statement/prospectus with
the Securities and Exchange Commission in connection with the
transaction, and each company expects to mail the proxy
statement/prospectus to its shareholders. These documents contain
important information about the transaction. Investors and security
holders are urged to read these documents carefully when they are
available. Investors and security holders will be able to obtain free
copies of these documents through the website maintained by the
Securities and Exchange Commission at www.sec.gov.
"Safe Harbor" Statement under the Private Securities Litigation
Reform Act of 1995
The statements contained in this release, which are not historical
facts, are forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Examples of such forward-looking statements
include Secure Computing's belief that the merger and Warburg Pincus
financing will be completed, CyberGuard is an excellent fit with
Secure Computing, the acquisition of CyberGuard will strengthen Secure
Computing's current activities, and that the merger will add a base of
new customers, expand the scope of Secure's product line and be
accretive to Secure Computing's earnings within the second full
quarter of operations following the close of the transaction. These
statements are subject to uncertainties that could cause actual
results to differ materially from those set forth in or implied by
forward-looking statements. These risks and uncertainties include,
among others, the following risks: that the merger and Warburg Pincus
financing will not close, that the closing will be delayed, that
customers and partners will not react favorably to the merger, risks
associated with acquiring other companies, including integration
risks, and other risks described in Secure Computing's and
CyberGuard's Securities and Exchange Commission filings, including the
Registration Statement on Form S-4 to be filed with the SEC in
connection with the transaction, Secure's Annual Report on Form 10-K
for the year ended December 31, 2004 and its Quarterly Report on Form
10-Q for the quarter ended June 30, 2005, under the captions "Risk
Factors" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and CyberGuard's Annual Report
on Form 10-K for the year ended June 30, 2004, and its Quarterly
Report on form 10-Q for the quarter ended March 31, 2005, under the
captions "Risk Factors" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations." Neither Secure nor
CyberGuard undertake any obligation to update these forward-looking
statements to reflect events or circumstances after the date of this
press release.
Secure Computing and CyberGuard and their respective directors and
executive officers may be deemed to be participants in the
solicitation of proxies from the security holders of CyberGuard in
favor of the merger and from security holders of Secure Computing in
favor of the issuance of the shares in the merger and the Warburg
Pincus financing. The directors and executive officers of CyberGuard
and their beneficial ownership of CyberGuard common stock are set
forth in the most recent proxy statement filed by CyberGuard with the
Securities and Exchange Commission on October 25, 2004. The directors
and executive officers of Secure Computing and their beneficial
ownership of Secure Computing common stock are set forth in the most
recent proxy statement filed by Secure Computing with the Securities
and Exchange Commission on March 28, 2005. Copies of those proxy
statements may be obtained free of charge at the Commission's website,
www.sec.gov. Security holders of Secure Computing and CyberGuard may
obtain additional information regarding the interests of the foregoing
people by reading the proxy statement/prospectus when it becomes
available.