from the October 2010 issue

Radware close to $1b acquisition by HP or IBM

CEO Roy Zisapel and his father Yehuda stand to gain $200 million from the deal.

Informed sources indicate that integrated smart networking solutions developer Radware Ltd. (Nasdaq: RDWR is in talks to be sold to either HP or IBM.

After 14 years of activity and more than 10 years as a public company, Radware is about to become part of one of the world's largest companies. Both HP and IBM are technological partners of Radware.

The expected value of the deal is around $945 million, or $45 per share, representing 60% premium on the market price. The company's share price has not been that high since 2000, at the height of the high-tech boom. This will be one of the biggest exits in Israel in recent years.

Yehuda Zisapel and his son Roy Zisapel, who is the company's CEO, stand to gain about $200 million from the deal. Radware is part of the RAD Group, a collection of technology companies, including start-ups and public companies, owned by the Isabel brothers Yeshiva and Zahra.

Radware declined to comment on the report. IBM said that the company does not comment on rumor and speculation. HP also declined to comment.

Radware was founded in 1996. It provides hardware for networking solutions on websites of companies and organizations in real time when virtual traffic becomes congested.

During August of this year, Radware's share price rose by almost 30%, and this could have created the momentum of interest in acquiring the company. Subsequently, analysts at Oppenheimer raised the share's target price from $26 to $30, and commented that the company could be acquired for its intellectual property.

This is not the first time that Radware's owners have conducted negotiations for the company's sale, although previously the price tag was nothing like $1 billion. The company raised $63 million at a market value of $260 million at its IPO on NASDAQ in 1999 with a share price of $18. The share price climbed to $80 by 2000, giving a market cap of $1 billion. In January 2000, the company held a secondary offering at a valuation of $800 million.

2005-2007 were difficult years when the company disappointed and got into the habit of publishing profit warnings. It even stopped publishing guidance.

But Radware's fortunes have bounced back following the acquisition of Nortel Networks unit Alteaon for $17 million 18 months ago. Since then, revenue and profits have been on the rise. In the second quarter of 2010, revenue reached $35.2 million, 30% up on the corresponding quarter, and profit $1.4 was million, with cash and cash equivalents of $160.4 million.

Reprinted from the Israel High-Tech & Investment Report October 2010

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