Britain probes deal by SafeNet

Fair trade unit looks into bid for nCipher

March 31, 2006|By STACEY HIRSH | STACEY HIRSH,SUN REPORTER

Plans for Belcamp-based network security company SafeNet Inc. to buy a British Internet security firm are being investigated by the British government for possibly stifling competition, the United Kingdom's Office of Fair Trading announced yesterday.

SafeNet announced last month a $150 million cash deal to buy Cambridge, England-based nCipher PLC. But the Office of Fair Trading, a government watchdog for consumers that aims to maintain competitive markets, said yesterday that the deal would bring together two of the U.K.'s largest suppliers of encryption and decryption technology, possibly thwarting competition and leading to less innovation and higher prices for consumers.

"We thought that there was a risk that competition would be substantially reduced," said Kate Wilcox, a spokeswoman for the Office of Fair Trading.

Britain's Competition Commission will examine the merger and report its findings by Sept. 13. The investigation adds six months to the nCipher deal, which had been expected to close in April.

Gregg Lampf, SafeNet's director of investor relations, said the company was considering its options.

"We're in the process now of deciding what we're going to do as far as going through the full six months or not," Lampf said.

The nCipher deal would be SafeNet's 11th acquisition in the past six years, and is expected to bring SafeNet more exposure in Europe, along with additional customers and relationships.

Lampf said the Maryland company would work with British government officials to help them see that there are other competitors in the encryption and decryption market.

"There are other companies that we compete with in the space," Lampf said.

Wilcox with the Office of Fair Trading said the SafeNet investigation deals strictly with competitive issues and does not involve security concerns.

Last week, Israeli-based Check Point Software Technologies Ltd. pulled out of a plan to buy Sourcefire Inc. of Columbia after security concerns prompted the Committee on Foreign Investment in the United States to further investigate the deal between the two makers of anti-hacking software.

SafeNet's clients include Nokia, Fujitsu, Bank of America and the Department of Defense.

The company has slightly more than 1,000 employees, including about 250 in Maryland; nCipher has about 160 employees in Cambridge and at offices in the United States and abroad.

SafeNet announced yesterday that the U.S. government had certified its KIV-7M encryptor. Shares of SafeNet rose 24 cents, or 0.92 percent, to close at $26.40 in Nasdaq trading.

stacey.hirsh@baltsun.com

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