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Case Studies

Peter A. Sokoloff & Co. regularly analyzes transactions which occur within the industries covered. An archive of these case studies is kept online as a courtesy to our colleagues. To receive by e-mail new case studies as they are prepared, please e-mail [email protected] with your contact information.

Archives > Transaction Case Study 52

ActivIdentity to be Acquired by ASSA ABLOY, Parent Company of HID Global

The principal driver behind this acquisition is to position HID to meet growing requirements that security systems provide a unified, pre-integrated platform for both logical and physical access.

On Monday, Oct 11, 2010 Fremont, CA based ActivIdentity Corporation, (NASDAQ: ACTI) announced it has signed a definitive agreement to be acquired by ASSA ABLOY AB (Sweden), the parent company of HID Global, in a cash transaction at a price of $3.25 per share, or approximately $162 million. The per share price represents a premium of approximately 43% over the closing price of ActivIdentity shares on Friday, October 8, 2010 and a premium of 48% over the 20-day average of closing prices.

The business has no debt and as of the 6/30/10 SEC filing, had cash and short term investments totaling $77.4 million. The Enterprise Value of the transaction (Total value of the transaction minus cash plus debt) is approximately $84.6 million. Trailing twelve month (TTM) revenues were $57.3 million, meaning that the transaction was valued by Assa Abloy at 1.48x TTM revenue.

ActivIdentity’s historical revenues have been flat, with little change over the last 3-4 years. In the same period, Earnings and EBITDA have been non-existent. Cash burn in the TTM was about ($1.5 million).

Why would Assa Abloy pay such a price for a flat business with no earnings? The answers lie in the future. The bet is that converged logical and physical security will become the standard for almost any sized enterprise. The idea that the same access code and/or keycard which gets you in the front door will also provide hierarchal access to your PC, network, storage and databases is certainly attractive.

Thus far, converged physical and logical security have principally been the purview of large IT integrators like SAIC, Accenture and HP. Undertaking massive projects to integrate diverse government and some highly secure enterprise systems has generated huge billings and profits for the professional services folks.

HID/ActivIdentity promises more of an off the shelf solution. Less Integration = Less Cost. The logic makes sense, but the physical reality is that old habits take a long time to change. The jury may remain out for some time as the partners seek traction for the combined offering. However, we applaud Assa Abloy for long term thinking and suspect that as this tree grows, the fruits of the harvest will become plentiful.

The acquisition, which is subject to ActivIdentity shareholder approval, applicable regulatory clearances and other customary closing conditions, is expected to close in December 2010.

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