SurfControl falls to US rival

Websense has made a $400m offer to buy UK security vendor SurfControl, and said there will be job cuts when the deal closes.

The combination of the two companies will create "an IT security solutions company with the scale and product offering to compete more effectively with large global security software companies," said Websense CEO Gene Hodges. Websense has offered £7 per share, for a total of £201 million.

Surfcontrol urged its shareholders to accept the deal. “This proposal offers a significant premium to SurfControl's shareholders which fairly recognises the value that has been built through the focused strategy of excellence in execution we have pursued,” said Patricia Sueltz, CEO of SurfControl, “The proposed acquisition by Websense represents another major step in the development of SurfControl's business, which will become part of a larger organization better positioned to compete in the growing market for Internet security services."

Both companies provide network security software to head off phishing, spyware, virus and other threats to IT systems. SurfControl serves 16 million users globally and Websense serves 25 million.

In a 36-page document detailing the acquisition plans and combined product road maps, Websense noted that the acquisition would give it access to SurfControl's BlackSpider software-as-a-service offering for website and email security, which SurfControl acquired in 2006. "Websense views the on-demand delivery model as important to its current and future product offerings," the document said.

Websense said the acquisition would result in $60 million in cost savings and, although it will initially dilute Websense's earnings in the short term, it is expected to improve earnings in the 12 months after the deal closes, which is expected in about four months.

Some of the savings may come from lay-offs, but the company was not specific on how many of Websense's 750 employees and SurfControl's 600 will lose their jobs. Websense said while it anticipates "significant restructuring," the new combined companies will be able to grow enough to create more jobs in the future.

Websense posted net income of $32 million, or $3.85 per share, on revenue of $171.8 million in 2006.

Also yesterday, Doug Wride was named president of Websense, effective immediately. He will continue in his role as chief financial officer and lead the acquisition and integration of SurfControl. Wride will continue to report to Hodges.