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A leading Israeli software company abandoned its plans Thursday to buy a smaller US rival in a $225 million deal because of national security objections by the Bush administration.
Check Point Software Technologies Ltd. in Ramat Gan, Israel, formally withdrew its proposal near the conclusion of a rare, full-blown investigation by a US review panel over the company's plans to buy a smaller rival, Sourcefire Inc.
Check Point had been told US officials feared the transaction could endanger some of the government's most sensitive computer systems.
Lawyers for Check Point offered to attach conditions to the sale that executives believed were onerous but were intended to satisfy the concerns expressed by the review panel, the Committee on Foreign Investments in the United States, said one person familiar with the process. But no agreement could be reached.
The Treasury Department, which oversees the committee, formally accepted Check Point's request to withdraw from the review process. This ensures the panel will not be required to submit recommendations to President George W. Bush whether to block the deal.
The committee has concluded only 25 full-blown investigations in more than 1,600 business transactions it has reviewed since 1988. In roughly half the investigations, companies pulled out of the deal rather than face imminent rejection.
Former president George H.W. Bush is the only president ever to block a deal, stopping the sale of a Seattle aircraft parts manufacturer to China in February 1990.
The objections by the FBI and Pentagon were partly over specialized intrusion detection software known as "Snort," which guards some classified US military and intelligence computers. Snort's author is a senior executive at Sourcefire, based in Columbia, Maryland.
The investigation was carried out by the same US review panel that approved the now-abandoned ports deal involving Dubai-owned DP World.
In private meetings between the panel and Check Point, officials from the FBI and Defense Department objected forcefully to permitting any foreign company to acquire some sensitive Sourcefire technology for preventing hacker break-ins and monitoring data traffic, an executive familiar with the discussions previously told The Associated Press. This executive spoke on condition of anonymity because government negotiations are supposed to remain confidential.
Under the sale, publicly announced October 6, Check Point would own all Sourcefire's patents, source-code blueprints for its software and the expertise of employees.
The review panel privately notified Check Point on Feb. 6 it intended to fully investigate the transaction's security risks, the executive said. That was days before the furor erupted over the Dubai ports deal.
Check Point disclosed the news to investors February 13, but the announcement drew little attention despite escalating scrutiny and interest in Washington over such reviews.
Sourcefire's protection and monitoring technology builds on the popularity of Snort, which was created by its chief technology officer and is distributed free.
Unlike Sourcefire's commercial products, Snort's blueprints are open for inspection to assure it works as advertised. This makes it popular inside the US intelligence community, even alongside more mainstream security products from Cisco Systems Inc. or Juniper Networks Inc.