ISRAEL 
HIGH-TECH & INVESTMENT REPORT

from the February 2009 issue


Vector finally gets Aladdin

The private equity firm will pay $160 million cash for Aladdin Knowledge Systems, representing a 20% premium over Friday's closing share price.

Tel Aviv-based information security company Aladdin Knowledge Systems (Nasdaq: ALDN; TASE: ALDN) announced today that it had entered into a definitive merger agreement to be acquired by an investor group lead by Vector Capital. The transaction is valued at approximately $160 million, which compares with a market cap of $133.48 million for Aladdin at the close of trading on Friday in New York.

Trading in Aladdin shares on the Tel Aviv Stock Exchange has been suspended.

Aladdin shareholders will receive $11.50 per share in cash for each share of common stock they hold. This represents a premium of approximately 20% over Aladdin's closing share price on Friday, and a premium of approximately 64% over Aladdin's closing share price on January 5, 2009, the last trading day before Aladdin's announcement that it was in continuing discussions with Vector Capital on a possible strategic transaction.

Vector Capital has been attempting to take over Aladdin since August 2008, when it announced that it had reached a 9.1% stake in the company. On August 20, Vector announced an offer of $13 per share, but Aladdin's board rejected it.

Of the current transaction, Margalit said today, "After extensive negotiations and careful and thorough analysis, conducted with our independent advisors, the board has unanimously endorsed this transaction as in the best interests of the company and our shareholders."

Fishman said, "We are very excited about adding Aladdin to our portfolio of outstanding technology companies and believe that placing Aladdin's DRM and authentication assets under common management with those of our portfolio company, SafeNet Inc., a global leader in information security, makes considerable strategic sense and will greatly benefit all stakeholders.

"Aladdin is an exceptional company, with significant potential and a strong commitment to its employees, partners and customers worldwide. We understand Aladdin's industry and business well, and look forward to working collaboratively to ensure a smooth and expeditious transition."

Vector Capital's announcement said that the transaction was subject to certain closing conditions, including the approval of Aladdin's shareholders and antitrust regulatory approvals. Approximately 14% of Aladdin's outstanding shares in the aggregate are held by an affiliate of Vector Capital, and directors of Aladdin, including Margalit, have entered into a voting agreement for 19% of the outstanding shares under which they have agreed to vote all of their shares in favor of the transaction. The transaction is expected to close in the next two to three months.



Reprinted from the Israel High-Tech & Investment Report February 2009

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