(Bloomberg News) -- Raytheon Co. is investing $1.57 billion to create a new cybersecurity company with private-equity firm Vista Equity Partners LLC as the defense contractor seeks to capitalize on emerging threats to private data and broaden its customer base in the business world.
The new firm will combine Raytheon’s cyber products unit with Websense Inc., which Raytheon agreed to acquire from Vista as part of the transaction announced Monday. The deal comes as demand for cybersecurity has soared following successful hacking breaches of Sony Corp., Target Corp. and JPMorgan Chase & Co.
The threats to software and electronic data have expanded in recent years to include nation states, terrorist groups, organized crime and individual hackers, said Raytheon Chief Executive Officer Thomas Kennedy. Over the past year and a half, Raytheon, the world’s biggest missile maker, has sought to broaden its capabilities beyond serving the U.S. government to include customers in the commercial arena, he said.
“This overwhelming cybersecurity threat is causing concern for businesses and CEOs,” he said Monday in a telephone interview. “It is a sobering reality.”
Raytheon looked at a number of potential acquisitions before settling on Websense, Kennedy said. Over the past decade, Raytheon has done more than a dozen cybersecurity-related deals, he said. In November, Waltham, Massachusetts-based Raytheon acquired Blackbird Technologies, a surveillance and cybersecurity company for $420 million.
Websense, based in Austin, Texas, makes software that blocks websites and lets companies inspect network traffic and filter e-mails for security and hacking threats. John McCormack, Websense’s chief executive officer, will hold the same title for the newly created company.
Raytheon agreed to acquire Websense for $1.9 billion from Vista, of which $600 million will be a loan to the new joint venture. Raytheon will contribute $1.57 billion in cash and its cyber products unit, valued at $400 million, Raytheon said in a statement. Raytheon will own 80.3 percent of the joint venture, which will have an enterprise value of $2.3 billion.
The transaction is expected to close in the second quarter of 2015, Raytheon said.
While the deal will lead to a slight deterioration in Raytheon’s credit metrics, Standard & Poor’s Ratings Services held the company’s long-term debt ratings steady at A with a stable outlook on Monday, saying it had already considered the potential for such an acquisition. Bloomberg first reported that Raytheon was in talks to buy Websense on March 16.
“Defense contractors have had mixed results expanding into the commercial markets due to challenges in adapting to nondefense customer purchasing practices,” the ratings agency said. “However, this risk is partially mitigated by Websense’s experienced sales staff that are accustomed to selling to commercial clients.”
Raytheon’s shares fell 0.4 percent to $107.28 at 11:17 a.m. in New York. They were down 0.4 percent this year through Friday, compared with a 1.1 percent increase in the Standard & Poor’s 500 Index.
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