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NSO Kills Merger Talks with Surveillance Company Verint

The stock and cash deal negotiated would have seen Verint pay a combined $1 billion dollar for NSO

Golan Hazani 12:1623.07.18
The $1 billion merger deal between the defense division of Nasdaq-listed surveillance and business intelligence company Verint Systems Inc. and Israeli cyber surveillance company NSO Group is off, two people familiar with the matter told Calcalist on condition of anonymity. The merger talks were first reported in May.

 

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According to the two people familiar with the matter, continuous opposition from NSO co-founders and co-managers Shalev Hulio and Omri Lavie led to the termination of the talks.

 

NSO founders Omri Lavie (left) and Shalev Hulio. Photo: Bar Cohen NSO founders Omri Lavie (left) and Shalev Hulio. Photo: Bar Cohen

 

 

NSO declined to comment.

 

Verint has been approached for comment but has yet to respond.

 

NSO develops and sells cyber attack tools that can be used to gather intelligence from mobile phones and other devices. The company's clients include governments and law enforcement agencies, and its technology has been implicated in scandals involving alleged human rights violations a few times in the past. In recent years, the company has been experiencing accelerated growth.

 

Melville, New York-headquartered Verint registered a net loss of $29 million in 2017, weighed down by its defense focus. The Nasdaq-listed company previously planned to spin-off its defense division but met with a cold shoulder from investors. Verint's stock rose by over 10% since the possible acquisition was first reported. Originally founded in Israel, Verint employs 5,100 people, 1,100 of them in its Israeli offices.

 

The stock and cash deal negotiated would have seen Verint pay a combined $1 billion dollar for NSO.

 

In 2014, private equity firm Francisco Partners Management LLC bought a majority stake in NSO.

 

Francisco Partners declined to comment on the recent unsuccessful negotiations with Verint.

 

Together, NSO founders Hulio and Lavie hold a 20% stake in the company, but their consent is seen as crucial given their central role at the company.

 

Hulio and Lavie’s objections to the merger were due to wide differences in the organizational culture of the two companies, one person familiar with the matter said. Other objections related to the level of independence NSO will have in a merged company, and to the dependence of the overall worth of the deal on Verint’s stock price, that person said.

 

Earlier this month, Israeli court partially lifted a gag order on an indictment filed against a former NSO employee accused of stealing NSO's spyware code and data and attempting to fence it off on the dark web for crypto coins worth $50 million. The employee was arrested before he managed to sell the code, after the third party he was negotiating with contacted NSO.
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