RSA buys Cyota for $145 million

Once the deal is closed, which was expected to take 30 days, Cyota would operate as unit of RSA and retain its management and workers.

By YIGAL GRAYEFF
December 6, 2005 07:56
2 minute read.
naftali bennett 88 298

naftali bennet 88 298. (photo credit: )

 
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Massachusetts-based RSA Security on Monday agreed to buy anti-fraud software company Cyota for $145 million in cash. RSA will pay up to $136m. for all of Herzilya-based Cyota's shares outstanding; $5.5m. to fund a three-year retention pool and at least $3.5m. to assume all of Cyota's outstanding stock options. Once the deal is closed, which was expected to take 30 days, Cyota would operate as unit of RSA and retain its management and workers. "We fight the fraudsters of the world. We protect the customers of banks when they make acquisitions over the Internet," Cyota Founder and Chief Executive Naftali Bennett said in a telephone interview. "We will be responsible for the consumer business of RSA and this is the strategic logic of the acquisition." Bennett noted, however, that Cyota did not pursue a sale. "We did not go out to be sold. Four different companies approached us over the past few months. Now we get a deep pocket and strong backing that will allow us to grow and capture the consumer market." Cyota says on its web site that its technology has reduced online banking fraud by 80 percent and that its anti-phishing service has reduced the lifespan of a phishing attack from six days to five hours. Phishing is the attempt to gain confidential information, such as account numbers, passwords, and credit card numbers, by sending fraudulent e-mails that appear to come from legitimate businesses. Cyota has five products and services that protect 430 million bank customers around the world, including those of Israel's three credit card companies and Barclays, HSBC and JP Morgan Chase internationally. One Cyota product attempts to ensure that a person carrying out a transaction is the authorized customer and not somebody else. The company also has a "war room" staffed by 40 analysts who attempt to identify and block online banking fraud. Following the deal with RSA the company plans to expand. "We will be carrying out a pretty aggressive hiring program, because we need to expand and accelerate very quickly in order to catch the consumer market," he said, although he declined to provide further details. Since it was founded in 1999, Cyota has raised $27m. from investors, including Israel Seed Partners, Giza and Poalim Capital Markets, which expects to make $10m. from the deal as it owns 7% in the start-up. Bennett said Cyota expects to achieve a net profit early next year and he forecast 2006 revenue of $24m., representing 100% growth.

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