By Robert Wall And Ed Ballard
LONDON-- BAE Systems PLC, Europe's largest defense company, is
increasing its bet on cybersecurity as a future growth driver with
the planned $232.5 million acquisition of SilverSky to take
advantage of growing demand to protect remotely stored data.
BAE, which builds Eurofighter Typhoon fighter jets, will buy New
York-based Perimeter Internetworking Corp., SilverSky's holding
company, using its existing cash reserves, the London-based company
said Tuesday.
SilverSky provides cloud-based cybersecurity services such as
email protection and managed applications to 5,500 customers,
mostly in the U.S. It is focused in sectors including finance,
retail, energy and critical infrastructure. The company offers
services including protecting a client's network or taking their
data and storing it securely.
"The acquisition of SilverSky enhances our strategy to grow BAE
Systems' Applied Intelligence commercial cybersecurity business,"
said Chief Executive Ian King.
Several high-profile breaches of protected data have raised
awareness of the vulnerabilities of cloud-stored data, including
the leaking of images of celebrities that resided on Apple Inc.'s
iCloud service. Apple said last month it would add additional
security measures to protect client data.
SilverSky is heavily focused on the U.S. but has been expanding
in Europe and Asia. BAE's Applied Systems unit has been looking to
expand its U.S. commercial cybersecurity activities.
Mr. King said SilverSky comes with "a large installed customer
base, providing a proven route to commercial markets in the U.S.
and other countries for our combined capabilities."
BAE already has big contracts with the U.S. military and
intelligence agencies on cyber-activities--managed through its BAE
Systems Inc. organization to meet U.S. national security
requirement.
The defense company has made a series of acquisitions to expand
its commercial cybersecurity activities since buying Detica Group
PLC in 2008 for GBP531 million ($856.1 million). The business was
rebranded as Applied Intelligence this year. About half the $500
million in sales at the unit come from commercial customers.
BAE Systems said sales at Applied Intelligence unit grew 7% in
the first six months. The order backlog for its Applied
Intelligence unit grew 25% to GBP328 million in the first six
months after increasing 60% in 2013.
SilverSky is expected to generate sales of $75 million in 2014
and start boosting BAE's earnings three years after the deal
closes, the company said.
The transaction is conditional upon receiving certain regulatory
approvals and is expected to close before the end of 2014.
BAE is also in the process of restructuring Applied Intelligence
after naming its strategy chief Kevin Taylor to head the unit
earlier this month.
Write to Robert Wall at robert.wall@wsj.com and Ed Ballard at
ed.ballard@wsj.com
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