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Secure Computing Snubs CyberGuard Offer

CyberGuard says it will change its $297 million offer to put some or all of it in cash.
A $297 million effort by network security company CyberGuard to speed the process of industry consolidation was stopped short Thursday after rival Secure Computing rejected a one-for-one stock exchange offer.

"Secure Computing's board believes that the proposal is not in the best interests of its stockholders," Secure Computing said in a statement.

CyberGuard chairman and CEO Pat Clawson said his company remains determined to buy Secure Computing because the deal is good for the stockholders of both companies. He said CyberGuard would now seek to sweeten the offer by raising some or all of the $297 million bid in cash.

Clawson told CRN on Wednesday that Secure Computing is a duplicate of CyberGuard, a comparison that in practice effectively dilutes the companies' abilities to take on the bigger players in the firewall and VPN markets.

"We have duplicate development expenses, duplicate marketing expenses, duplicate missions," Clawson said. "Together, we'll be much more well positioned to fight Check Point and Cisco."

CyberGuard made its bid of $297 million on July 11. Had the offer been accepted, $14 million worth of excess resources resulting from the blending of the two network security companies would have been reduced, Clawson said. "There's a big trim there," he said.

A source close to the negotiations said CyberGuard is positioned "to not take no for an answer" to its offer to acquire Secure Computing.

Clawson disagreed with reports that the bid was hostile. "A hostile bid is when you start buying the company's stock. This is clearly just an unsolicited proposal to acquire the company."

Tony Pitman, executive VP at South Seas Solutions, a value-added reseller and CyberGuard partner in Denver, said he believed the bid by CyberGuard represents only the tip of the iceberg when it comes to long overdue consolidation in the network security industry. "It's too small a market with too many players," Pitman said. "The quicker everyone starts consolidating, the quicker today's smaller guys will be able to compete against the big enterprise vendors. If not, Cisco could buy CyberGuard. You'll have Goliath buying David."

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