The owners of the encryption specialist SafeNet announced last week that it will acquire Israeli security vendor Aladdin Knowledge Systems for $160 million (£109 million), with the intention of eventually merging the two security companies.

SafeNet itself was no stranger to acquisitions, after acquiring the likes of Securealink, Cylink, Raqia Networks, SSH over the years. It also merged with Rainbow Technologies back in 2004, a move that made it the world's seventh largest information security company.

Since 2004, SafeNet has acquired DMDsecure, Datakey, Mediasentry and Eracom Technologies. SafeNet was also reportedly in talks back in February 2006 to acquire Cambridge encryption company nCipher for $150 million, but the deal did not go ahead in the end. "The UK process didn't allow a quick resolution of Fair Trade issues," a SafeNet spokesperson told Techworld via email. "Rather than a prolonged and expensive process to address the issues we disengaged from the acquisition."

Despite this, its other acquisitions have helped Belcamp, Maryland-based SafeNet grow to a company of more than 1,100 staff globally, with $300 million in annual sales, and a broad portfolio of encryption and security products.

SafeNet itself was taken private by Vector Capital back in 2007 in deal worth $634 million (£431 million).

The deal to acquire Aladdin is therefore one in a long line of such moves for SafeNet, and will give it access to Aladdin's abilities to protect copyrighted software (i.e. software rights management and authentication). After the completion of the Aladdin transaction, SafeNet says it will be the third largest pure-play information security provider with approximately $500 million of total revenue.

"By placing these two leaders under common ownership, we have significantly extended our presence in the Software Rights Management and Authentication industries," said David Fishman, a partner at Vector Capital in a statement.

"SafeNet has built a strong and steadily growing company under private ownership and this transaction further extends our presence in two critical industry segments. We are confident that the combined scale, customer base, product breadth and technical strength gives us a tremendous platform for innovation and growth," said Chris Fedde, SafeNet's President and COO.

The acquisition is subject to approval of Aladdin's shareholders, in a meeting scheduled for 20 February. If the deal is approved, Aladdin will become a portfolio company of Vector Capital, along with SafeNet. When Aladdin is fully integrated in to SafeNet, the combined company will have three primary business units:

  • The Rights Management division - This business will be where Aladdin is integrated and will be the largest division in SafeNet with over $200 million in revenues. It will be led by Prakash Panjwani, Senior Vice President at SafeNet.
  • Commercial Data Protection division - Provider of data protection solutions. Products in this division include: database and disk encryption, hardware security modules, and network encryption.
  • Government Data Protection division - Provider of data protection solutions to federal governments around the world.

Aladdin has been around since 1985 and is publicly listed on the Nasdaq stock exchange. Vector Capital has actually been after it for a while now, having made two previous attempts to acquire Aladdin back in 2008.