Zergo Holdings, the British provider of e-mail and cryptographic products, has confirmed that it is to acquire Baltimore Technologies, the Irish e-commerce security company, in a deal valued at $60 million (£40 million).
Baltimore, in which financier Mr Dermot Desmond held a stake estimated at between 55 and 60 per cent, is a global player in the provision of public key infrastructure (PKI) technology, a key enabler for e-commerce. It is best known for providing the digital signature system used by US President Bill Clinton and the Taoiseach Mr Ahern to execute the first digitally signed state document between governments.
"The merger creates a worldwide market leader in the provision of e-commerce and enterprise security systems with approximately 350 employees operating from 11 international offices and a strong global partner network," the two companies said.
The enlarged company will be the biggest player in PKI technology outside the US.
Zergo intends to purchase 100 per cent of Baltimore by issuing about 9.1 million shares, $5.0 million of loan notes and by repaying a Baltimore loan of £860,000. The deal, which must first be approved by Zergo shareholders, is expected to be completed by the middle of January.
Intel Corporation, with which Baltimore has been in talks about issues such as technology co-operation and marketing, will also take a 6.26 per cent stake in the new company, acquiring the shares from the Baltimore shareholders excluding employees.
Professor Henry Beker, Zergo's chairman and chief executive, will become chairman and CEO of the enlarged company, which will be headquartered in Basingstoke in the UK. Baltimore's President and CEO, Mr Fran Rooney, will be appointed chief operating officer at the new group and will join the board of directors.
The new company, which has annualised joint revenues of more than $30 million, will be aiming to grow this and also grow its market share in the PKI, encryption and authentication systems market, which is forecast to be worth more than $3.5 billion by 2001.
It aims to become the global leader in this sector and will be targeting the US market in particular. "We were keen to have this deal completed before the year end so we could rapidly attack the US market which is open for exploitation," Prof Beker said.
As the company's visibility in the US grows, it will consider the option of a Nasdaq listing while it is also considering an Irish listing.
Shares in Zergo, which is quoted on the London Stock Exchange, rose to a high of 365 pence sterling yesterday before closing at 360p, a gain of 17.5p on the day.
The company also announced interim results for the period ending October 31st, 1998. It posted a 44 per cent increase in sales to £7.7 million.
