Cambridge UK, October 21, 2005 - nCipher plc ("nCipher") (LSE: NCH), a leading provider of cryptographic IT security solutions, announces that it has entered into a conditional agreement to purchase a majority of the voting capital of Abridean (US) Inc. ("Abridean"), a leading vendor of user management and provisioning solutions headquartered in Chicago, USA. In addition, nCipher currently intends to offer to purchase all outstanding common stock of Abridean which could enable nCipher to acquire the business in its entirety (together the "Acquisition"). The maximum total consideration payable under the terms of the Acquisition is US$ 17.9 million1 (£10.2 million2). nCipher also intends to repay US$1.5 million pursuant to the terms of a loan provided by MMV Financial, Inc. due to Abridean, Inc.
The proposed acquisition has a strong strategic fit, enabling nCipher to enter the significant and growing market for Identity Management. The two companies believe that together they can exploit nCipher’s sales channel and financial muscle to grow the combined business.
Due to the size and nature of the Acquisition, it constitutes a Class 1 transaction, pursuant to the FSA's Listing Rules, and, in addition, due to the association of the Chairman of nCipher with one of the groups of venture capitalists who own preferred stock in Abridean, it is considered a related party transaction. Accordingly the Acquisition will need to be approved by shareholders at an extraordinary general meeting. A circular will shortly be posted to shareholders convening an extraordinary general meeting to be held at Jupiter House, Station Road, Cambridge CB1 2JD at 12 noon on 18 November 2005.
Background to and reasons for the acquisition
As part of the continuous management review of the group's business, between November 2004 and May 2005 the board of nCipher (the "Board" or the "Directors") carried out an analysis of the future evolution of various sectors within the IT security market including the sectors covering identity management and the protection of corporate information.
The technology of encryption and decryption has been the focus of nCipher's expertise for many years, but in order to capture the broader market opportunity it must be coupled with the technology for identifying and managing those who are the right users in the first place. For this reason, nCipher proposes to take the strategic step of acquiring Abridean.
Following a period of extensive research within the identity management marketplace, Abridean has been identified as a well-focused company, specialising in the management of identities, roles and user's rights within organisations through their abrideanProvisor™ product line. Abridean has technology whose modularity and flexibility positions it to satisfy the emerging requirements for a broader and more secure approach to user and credential provisioning within organisations concerned with the protection of consumer privacy and the integrity of their own internal systems. Abridean has a well-regarded software engineering team. The proposed acquisition of Abridean is therefore intended to enable nCipher to capitalise on trends within the expanding identity management market and address the demand for a more unified and robust approach to stronger authentication and rights management. nCipher and Abridean have a shared vision and complementary expertise. The Directors believe that together the two companies can establish a powerful suite of solutions that capitalise on convergence between their respective markets. Over the coming years it is anticipated that the combination of Identity Management and cryptography will become the common mechanism by which organisations can cost-effectively define and enforce access rights and satisfy related audit and compliance requirements across the enterprise.
Benefits of the Transaction and the Offer
The Directors believe that the Acquisition will benefit the enlarged group in a number of ways:
- The combination of Abridean’s user management technology with nCipher’s portfolio of key management technology should generate a significant competitive advantage for both nCipher and Abridean in their respective markets;
- Abridean provides technology and expertise in an area identified as a technology gap in nCipher’s own internal strategy evaluation;
- Abridean’s existing business platform can be enhanced by nCipher’s distribution capability and financial strength;
- Abridean’s existing professional services capability expertise will enable nCipher to more quickly establish a broader service offering to support its other product lines; and
- Abridean’s development capability is exclusively focused on designing enterprise-class software solutions. Access to, and control over, this capability will accelerate and strengthen nCipher’s transition to deliver more valuable solutions.
Information on AbrideanAbridean was founded in February 2000 and is a provider of user management and provisioning solutions. In 2003 the abrideanProvisor product suite was introduced to serve the needs of medium and large enterprises and now produces the majority of current product related revenues. abrideanProvisor is a complete user management and provisioning system that enables organisations to manage all activities associated with creating, maintaining, and removing user identities and their associated rights and entitlements across the entire enterprise. The abrideanProvisor product line is built on established technology and is currently used to manage hundreds of thousands of users. The abrideanProvisor product line comprises a number of components that can be combined in a modular fashion, including:
User Manager – a system for managing user identities and entitlements throughout their lifecycle across the entire enterprise;
Compliance Manager – a system that satisfies the requirements to demonstrate compliance to internal and externally audited security policies;
Password Manager – a system that addresses the need to enforce security policies associated with the use of passwords and to address the spiralling help-desk costs that result from these increasingly complex policies; and
Group Manager – a system that overcomes the additional administrative burden of defining the membership and entitlement of groups of users.
Abridean’s current senior management comprises of Sean Sears, President and Chief Executive Officer, Jeff Schultz, Senior Vice President of Sales and Marketing, Greg O’Malley, Chief Technology Officer and Sandy Walsh, Vice President Product Development. Abridean currently employs approximately 35 staff in addition to the executives.
For the financial year ended 31 December 2004, under UK GAAP, Abridean had sales of C$2,575,720, made a net loss of C$2,350,272 and had gross assets of C$1,250,200.
Principal terms of the Acquisition
nCipher will pay up to US$10 million (£5.7 million2) in cash (being US$6.9 million (£3.9 million2) initial consideration and US$3.1 million (£1.8 million2) of earnout, based on certain revenue and profitability targets being achieved by Abridean in subsequent years following the Acquisition) for all of the preferred stock in Abridean, representing approximately 61 percent of the voting rights (and approximately 53 percent of the fully diluted capital stock assuming exercise of all options and warrants over shares of Abridean). In addition, nCipher currently intends to offer to purchase all of the outstanding common stock, any outstanding exchangeable shares and a warrant over preferred stock in Abridean. It is currently envisaged that the maximum cash consideration payable under these proposals will be US$17.9 million1 (£10.2 million2). nCipher also intends to repay US$1.5 million pursuant to the terms of a loan provided by MMV Financial, Inc. due to Abridean, Inc.
The consideration for the purchase will be satisfied using nCipher's existing cash resources and is subject to downward adjustment based on the net assets of Abridean at completion.
The proposals, along with all indebtedness to be assumed, value Abridean at approximately £12.2 million1,2, of which £4.7 million1,2 is due at closing, £5.5 million1,2 is due in earnout and £2.0 million2 is assumed debt (taking account of net assets at closing).
Executive quotes
"Abridean has been identified as a well-focused company specialising in the management of roles and user's rights within organizations, it has technology whose modularity and flexibility positions it to satisfy the emerging requirements for a broader approach to provisioning within security-sensitive organizations, and it has a well-regarded software engineering team", said Alex van Someren, Chief Executive Officer of nCipher. "nCipher and Abridean have a shared vision and complementary expertise. We anticipate that the combination of identity management and cryptography will become the common mechanism by which organisations satisfy related audit and compliance requirements across the enterprise".
"In addition to enhancing Abridean's existing business platform through the ability to leverage nCiphe's distribution capability and financial strength, our own experience in delivering a range of professional services will become increasingly valuable as nCipher continues its evolution as a provider of turn-key security solutions", said Sean Sears, Chief Executive Officer of Abridean. "Furthermore, the combination of our user management technology with nCipher’s portfolio of cryptographic products and expertise will generate a significant competitive advantage for both nCipher and Abridean in our respective markets."
Enquiries: Alex van Someren, Chief Executive Officer Ian Smith, Chief Operating Officer and EVP Finance Liz Harris, Director Corporate Communications Tel: +44 (0)1223 723612
Panmure Gordon & Co: Julian Hirst Jonathan Retter Tel: +44 (0)207 459 3600 About nCipher
nCipher is a leading provider of cryptographic security, enabling our customers to meet the challenges of verifying identity, protecting data and complying with security regulations. nCipher's solutions provide a unified approach to cryptographic management providing strict access controls and high assurance trusted processing, overcoming traditional issues of scalability, performance and weak platform security. The world's leading organizations work with nCipher to protect security critical systems such as web site infrastructure, online banking and payment processing networks, PKI, web services, databases and digital rights management schemes.
nCipher is the winner of the Microsoft Security Solution of the Year award 2004. The company is listed on the London Stock Exchange (LSE:NCH) and is a member of the FTSE TechMARK index with offices in Cambridge, UK; Boston, Washington, Hamburg and Tokyo. For more information on nCipher visit www.ncipher.com
1. Assumes full acceptance under the terms of the offer to purchase outstanding common stock at 4 Canadian cents per share at closing followed by up to 21 cents Canadian due under an earnout
2. Assumes GBP £1 to USD $1.76 based on the prevailing exchange rate at October 14th, 2005 and assumes GBP £1 to CAD $2.07 based on the prevailing exchange rate at October 14th, 2005
About Abridean Inc.
Abridean's flexible identity management solutions enable organizations to comply with government regulations, enforce security policies, and lower IT administration costs by automating and controlling employee access to networks, applications, data and devices.
Organizations rely on Abridean technology to quickly and easily deploy user management and provisioning solutions that fully automate user account set-up and maintenance - ensuring that users get rapid access to every system they need, and that the organization gains all of the control and audit reporting they need.
Abridean’s flexible policy-based architecture easily adapts to an organization’s unique administrative processes and includes sophisticated workflow, role and rule based entitlement definitions, easily-configurable use cases, automated reconciliation of security exceptions, and advanced audit logging and compliance reporting. Abridean’s lightweight connector framework ensures support for a wide variety of target systems and platforms.
Over 2500 companies currently use Abridean technology to manage users and provision applications. For more information, visit www.abridean.com or call 1-877-520-4277.