SafeNet acquisitions end with Rainbow, for now

SafeNet Inc. will not buy any more companies this year following the completion of its acquisition of Rainbow Technologies ? its biggest purchase to date ? but will spend the rest of 2004 combining the two firms' operations and strengthening their existing relationships with federal agencies, a SafeNet official said today.

The merger, originally announced Oct. 22, 2003, is estimated at $405 million. Shareholders of both companies approved the merger Monday.

Baltimore-based SafeNet and Rainbow Technologies of Irvine, Calif., provide network security solutions to the public and private sectors, including federal agencies.

Among SafeNet's federal clients are the National Security Agency, FBI, U.S. Postal Service, Department of Defense, IRS and the Social Security Administration. Rainbow Technology's government customers include the National Security Agency and the departments of Defense and Homeland Security.

Rather than plan further acquisitions or target other federal agencies for new contracts this year, SafeNet will use Rainbow Technologies' resources to "delve deeper" into the two companies' services with the departments of Defense and Homeland Security, said Maureen Kolb, SafeNet's corporate communications manager.

"We already have certain operations with them. Now we can go back to them and target new applications," she said.

The combined company will provide an array of security technologies, such as encryption platforms, authentication tools, network and security-systems management and software security and licensing products.

"The combined company will allow federal clients to purchase IT systems from a single vendor," Kolb said.

Rainbow Technologies is expected to add 4,000 new customers to SafeNet's client base, distribution channels in more than 100 countries and up to 570 employees to SafeNet's 215 workers, according to its 10-K report filed with the Securities and Exchange Commission March 10.

SafeNet's revenue doubled in 2003 to $66.2 million from $32.2 million in 2002, according to the SEC filing. The company also more than doubled its profit to $49.4 million in 2003 from $23.3 million in 2002.

The combined company will generate about $240 million in revenue and has a market capitalization of approximately $950 million, according to SafeNet.