RSA Security to acquire Cyota for $145m

RSA Security to acquire Cyota for $145m

RSA Security has signed a definitive agreement to acquire New York-based Cyota, a privately-held provider of online authentication and anti-fraud technology to financial institutions, for a maximum consideration of $145m.

The transaction is comprised of up to $136 million in cash for all of the outstanding capital stock of Cyota, $5.5 million in cash to fund a three-year retention pool and at least $3.5 million for the assumption of all outstanding Cyota stock options.

Massachusetts-based RSA says it expects the deal to add approximately $22m to $25m in revenue in 2006 and that it will be accretive to earnings for the second half of 2006.

Cyota's online fraud services currently protect thousands of banks of all sizes and over 430 million accounts. RSA claims the company has over 80% market share of the e-commerce authentication market in the US, and over 90% in the UK.

In addition to expanding its authentication offerings, RSA says the Cyota acquisition will open up new market opportunities by adding anti-fraud and transaction protection services to its portfolio, including an anti-phishing service that provides 24x7 detection of phishing attacks, alerts to customers and fraudulent site shut-down service.

Art Coviello, president and CEO of RSA Security, says: "Our customers will benefit from enhanced flexibility, and consumers will also be able to enjoy - through their account providers - access to strong authentication and transaction protection solutions that fit their lifestyles and security needs."

The deal is expected to close within 30 days, subject to any necessary regulatory approvals and customary closing conditions.

RSA says it is also restructuring its engineering resources into four core locations around the world. Under the plan around 120 positions will be relocated.

All engineering currently based in the company's offices in Vancouver, San Mateo and New York City will be relocated to Bedford, Massachusetts or to expanded operations in India and Brisbane, Australia. Cyota's research and development center in Herzelia, Israel will be unaffected by the plan.

RSA says it expects a total restructuring charge of $10m to $14m and will begin incurring these charges in the fourth quarter of 2005, continuing through to the corresponding period next year.

The vendor expects to save $4m to $6m annually following the restructuring, but will not begin realising the full benefit of the restructuring until the fourth quarter of 2006.

RSA also says its chief financial officer Jeff Glidden has resigned. Coviello, who served as CFO prior to his current role as president and CEO, has assumed the duties of CFO until a replacement is found.

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