Germany’s Continental AG is in advanced talks to buy Tel Aviv-based Argus Cyber Security, whose technology guards connected cars from hacking. The terms of the purchase are not yet final, but it is thought that the price tag for the automotive cybersecurity firm is between $300 million and $400 million.
Argus was founded in 2013 by three veterans of Israeli Military Intelligence vaunted 8200 technology unit, CEO Ofer Ben-Noon, Chief Technology Officer Yaron Galula and Vice President of Research and Development Oron Lavi. Each spent from six to eight years in the unit, working in cybersecurity development. In civilian life, the three worked at high-tech firms for a time before founding Argus. An early investor in the company was Zohar Zisapel, who has a long history in the Israeli tech industry and was a co-founder of the RAD group.
“This is not the first time such rumors have circulated and Argus does not comment on rumors or speculation,” a spokeswoman for Argus said on Monday. Officials at Continental declined to comment on what they called “speculation.”
Cybersecurity experts have criticized the automotive industry for failing to do more to secure internal communications of vehicles with network-connected features. The danger, they say, is that once external security is breached, hackers can have free rein to access onboard vehicle computer systems which manage everything from engines and brakes to air-conditioning and entertainment systems.
Carmakers say that any vulnerabilities in this area do not directly affect the critical safety features of a vehicle.
Continental, the world’s second-biggest supplier to carmakers by sales, makes control devices used to transfer data and enable communication between a vehicle and remote management tools such as web panels and mobile apps.
The company, which is based in Hannover, Germany, has 220,000 employees and last year had sales of about 40 billion euros ($47 billion). Company executives visited Israel recently, in part to discuss the terms of the acquisition of Argus.
Argus already collaborates with Continental. This month the Israeli company jointly launched a technology for delivering over-the-air vehicle software updates with Continental subsidiary Elektrobit.
Argus has raised $30 million, including $26 million two years ago from Magna International, Allianz, SBI Group and Israeli venture capital funds Magma and Vertex.
Argus’ customers include companies seeking to develop self-driving cars as well as suppliers to autonomous vehicle companies and independent producers of smart vehicle components. Since the industry is still new, it is thought that Argus’ revenues from these sales have been small.
This year Intel bought self-driving technology firm Mobileye, one of Israel’s biggest tech companies, for $15.3 billion. With more than 200 startups in the field, Israel is a growing center for automotive technology.
Argus CEO Ben-Noon told Reuters in March that the Mobileye deal could accelerate his company’s growth.
“There is no doubt there will be more investments in Israel for automotive, and a lot more M&A,” he said at the time, referring to mergers and acquisitions.
Argus was among the first companies to develop cybersecurity technology for the automotive industry, but it is not alone, having been joined in Israel by other companies offering solutions of various kinds.
The first company in the field in Israel was Arilou Information Security Technologies. A 60% stake in Arilou was purchased about a year ago by another Israeli firm, NNG, for $10 million.
About a year ago, Yuval Diskin, the former head of the Shin Bet security service, unveiled CyMotiv, an automotive cybersecurity company that he founded with two colleagues. The company was established with Volkswagen, which has a 40% stake in CyMotiv. Despite the German tie, the company’s founders insisted that it be established and operate from Israel, Diskin said.
Continental said in June that it was joining a self-driving platform developed by BMW, Intel and Mobileye with the German auto parts and tire manufacturer handling the integration of components and software.
The costs of integrating hardware, software and data and the accelerating pace of development of self-driving vehicles has sparked a growing number of alliances between automobile manufacturers and suppliers.
Continental said it would play a role in commercializing the new platform, which is to be sold to other automotive manufacturers.
Traditionally, many of Israel’s high-tech startups have sold out at an early stage to global companies, keen to tap into the skills of workers trained in the military and intelligence sectors. This was the case with Waze, the Israeli map app, which Google bought in 2013 for $1.15 billion.
On the other hand, Mobileye, which remains headquartered in Jerusalem, has become a pilgrimage site of sorts for industry officials from around the world and a showcase that highlights Israel as a center of know-how in the field of automotive high-tech. That has also led automotive giants such as General Motors, Mercedes-Benz and Delphi to decide to establish various operations in Israel.
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