Tech firm rejects suitor

Barracuda bid for Sourcefire worth $206 million

June 26, 2008|By Hanah Cho | Hanah Cho,Sun reporter

Sourcefire Inc. rejected a counteroffer from a California anti-spam firm that wants to acquire the struggling Columbia security-software company.

The company said yesterday that Barracuda Networks Inc.'s sweetened $8.25-a-share bid - 10 percent higher than a previous proposal - is not in the best interest of the company and shareholders. The new proposal is worth $206 million.

Sourcefire shares rose 45 cents, or 5.89 percent, to close at $8.09 yesterday.

Sourcefire is best known for selling software designed to work with its open-source intrusion prevention technology, Snort. It acquired the open-source software Claim AntiVirus last year. Its customers include federal intelligence agencies.

But it has struggled with losses since going public last year. It reported a net loss of $5.6 million last year. And four months after its chief executive announced plans to step down, the company last week announced that John C. Burris, sales and services head at information technology business Citrix Systems Inc., would succeed E. Wayne Jackson III.

"Sourcefire is uniquely positioned to drive the future of network security," Joseph R. Chinnici, nonexecutive chairman of the board, said in a statement. "Our incoming CEO John Burris is a leader who possesses the skills and experience to build on Sourcefire's strong momentum, strengthen our position as an industry-leading enterprise security company and continue to deliver value for our shareholders."

Sourcefire officials declined to comment beyond the news release.

Barracuda said late Tuesday that it raised its initial, unsolicited $7.50-a-share bid in a June 9 letter to Sourcefire. But Sourcefire rebuffed the higher offer on June18, two days after the company announced Burris' appointment.

"Despite their refusal of our revised proposal, we hope to continue dialogue with the Sourcefire board and Mr. Burris to reach mutually agreeable terms," Barracuda President and CEO Dean Drako said in a statement.

Kylie Heintz, a Barracuda spokeswoman, declined to comment on whether the privately held company would make another offer and reiterated Barracuda's desires to continue discussions.

Drako said in the letter to Sourcefire that "we are interested in working together with you and your team ... to understand where additional value may be found."

Ken Allen, an investment analyst at Baltimore-based T. Rowe Price Group, one of Sourcefire's largest investors, said that the new offer is still too low. He noted that Israeli-based Check Point Software Technologies Ltd. offered $225 million for Sourcefire in 2005 in a deal that eventually was scrapped by the federal government due to national security concerns. And since then, the company has grown dramatically as well as raised additional cash, Allen said.

"The intrusion, protection and prevention market has basically consolidated besides Sourcefire, so they are a unique asset," Allen said.

Barracuda's initial offer was 13 percent above Sourcefire's closing price on May 23, the last full day of trading before Barracuda proposed the unsolicited deal.

The increased offer is less than the $15 a share investors paid when Sourcefire held its initial public offering in March 2007.

hanah.cho@baltsun.com

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