RSA Security Buys Cyota for $145m

A year after raising capital at a company value of $23 million, Cyota announced yesterday that it was being bought out by RSA Security for $145 million in cash.

Just last year Haaretz chose Cyota as the most promising Israeli software firm.

The company will function as an independent unit of RSA after the buyout.

The sale represents the closing of a circle for Weizmann professor Adi Shamir, an international expert in cryptography who advised Cyota at the beginning of its life. Twenty years ago Shamir also developed some of the algorithms that are the basis of RSA's patented success.

Cyota was founded in 1999. It is a privately-held company and based in New York City. Cyota provides online security and anti-fraud solutions to thousands of financial institutions worldwide.

The founders and the 140 employees will receive $30 million of the sum.

The four founders - CEO Naftali Bennett, Michal Tzur, Chief Technology Officer Lior Golan and Marketing Vice President Amir Orad - will each collect more than $1 million. A number of other workers will also make more than $1 million, depending upon seniority and the options they hold.

Bessemer Venture Partners invested in Cyota for the first time a year ago, and will record a $22 million profit on its investment. Previous investors were RRE Ventures, Giza Venture Fund, Poalim Capital Markets, Israel Seed Partners and Quan Ventures.

"Today, RSA Security is the leader in protecting online identities and digital assets. Through our combination with Cyota, RSA Security will become the leader in the protection of consumer identities and remote transactions," said Art Coviello, president and CEO of RSA Security. "Our customers will benefit from enhanced flexibility, and consumers will also be able to enjoy - through their account providers - access to strong authentication and transaction protection solutions that fit their lifestyles and security needs."

RSA also announced restructuring charges in the fourth quarter related to facilities and layoffs. In a news release, the company said it expects the deal to add about $22 million to $25 million in revenue in 2006 and to add to its earnings for the second half in 2006. RSA also said Chief Financial Officer Jeff Glidden has resigned to pursue opportunities outside the company.

Coviello, who is currently the president and had served as CFO earlier, will assume the duties of CFO till a replacement is named.