Raytheon to pay about $1.6bn, including debt; Vista to take 20% stake in new company; deal to add over 20,000 commercial customers

Reuters
New York


US arms maker Raytheon Co is buying network security provider Websense Inc from private equity firm Vista Equity Partners LLC in a $1.9bn deal, the latest in the fast-growing cybersecurity market.
Several companies, including Sony Corp, Staples Inc, Home Depot Inc and Target Corp, have been targets of high-profile data thefts over the past two years.
“We’re seeing an exponential increase in the number of attacks by ultra-sophisticated attackers,” Raytheon Chief Executive Thomas Kennedy told Reuters.
 “It is the combination of those two that is leading to an explosion in the cybersecurity area.”
A cyber attack in mid-2014 at the US Investigations Services, which performs background checks for US government employees, compromised data of at least 25,000 workers, including some undercover investigators.
The Websense deal will add more than 20,000 commercial customers to Raytheon’s portfolio of predominantly government clients.
“This acquisition highlights the massive investments being allocated toward this high-priority area of IT spending as enterprises of all shapes and sizes look to bulk up legacy security systems with next-generation technologies,” FBR Capital Markets analyst Daniel Ives wrote in a note.
The global cybersecurity market is estimated to jump to about $156bn in 2019 from $96bn in 2014, according to research firm MarketsandMarkets.
Bain Capital LLC agreed last month to buy network security company Blue Coat Systems Inc in deal that valued the company at about $2.4bn, including debt.
Raytheon, which is paying about $1.6bn including debt for Websense, said it would combine its cybersecurity unit with the company. The deal is valued at $1.9bn, net of cash.
Vista will then invest about $335mn for a nearly 20% equity stake in the new company, Raytheon said yesterday.
The new company, which will be headed by Websense CEO John McCormack, will be a separately reported business unit, Raytheon said.
A board of directors will be formed for the new company and will include representatives of both Raytheon and Vista, the company said.
RBC Capital Markets LLC was the lead financial adviser to Raytheon. Morgan Lewis & Bockius LLP, Steptoe & Johnson LLP and Wilson Sonsini Goodrich & Rosati were its legal advisers.
Citi was the financial adviser to Websense, while Kirkland & Ellis LLP its legal adviser.
Raytheon’s shares were down about 1% at $106.81 on the New York Stock Exchange.