Francisco Partners buys WatchGuard

The Menlo Park, California-based PE firm has reached an agreement to acquire WatchGuard Technologies, an internet security software and hardware developer, for $151m in cash.

WatchGuard Technologies, a Seattle-based maker of internet security software and hardware, and private equity firm Francisco Partners have reached a deal for the private equity firm to buy WatchGuard for $151 million (€119.7 million) in an all-cash transaction.

Under the terms of the agreement, WatchGuard shareholders will receive $4.25 for each share of WatchGuard’s common stock. Wachovia Securities advised WatchGuard in the deal. The transaction is expected to close in the fourth quarter of 2006.

WatchGuard “has made significant investments in new product development efforts that we believe will fuel future growth,” said Francisco managing director Ben Ball in a statement. “We are committed to the company’s resellers and customers and look forward to further strengthening those relationships.”

In May, WatchGuard’s shareholders rejected a rights plan that would have helped its board resist unsolicited takeovers. Later that month, San Francisco-based private equity firm Vector Capital, which already had a 9.4 percent stake in WatchGuard, submitted an offer valued at $108 million. But in June it lowered its offer to $73 million following an “extensive due diligence investigation,” according to Reuters.

Last week, WatchGuard announced that it had settled an ongoing lawsuit against rival internet security company SonicWall for alleged misappropriation of WatchGuard trade secrets, stemming from a former WatchGuard employee’s decision to join SonicWall.

Francisco Partners has approximately $5 billion of committed capital under management, and its investments are concentrated in the technology arena. Its other portfolio companies include analytic software company WebTrends and AMI Semiconductor.

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