Raytheon to Buy Cyber Security Firm Websense in $1.9 Billion Deal

U.S. arms maker Raytheon is buying network security provider Websense from private equity firm Vista Equity Partners in a $1.9 billion deal, the latest in the fast-growing cyber security market.

The deal will add more than 20,000 commercial customers to Raytheon’s portfolio of predominantly government clients.

“This acquisition highlights the massive investments being allocated toward this high-priority area of IT spending as enterprises of all shapes and sizes look to bulk up legacy security systems with next-generation technologies,” FBR Capital Markets analyst Daniel Ives wrote in a note.

The global cyber security market is estimated to jump to about $156 billion in 2019 from $96 billion in 2014, according to research firm MarketsandMarkets.

Bain Capital LLC agreed last month to buy network security company Blue Coat Systems in deal that valued the company at about $2.4 billion, including debt.

Several companies, including Sony, Staples, Home Depot and Target, have been targets of high-profile data thefts over the past two years. A cyber attack in mid-2014 at the U.S. Investigations Services, which performs background checks for U.S. government employees, compromised data of at least 25,000 workers, including some undercover investigators.

“We’re seeing an exponential increase in the number of attacks by ultra-sophisticated attackers,” Raytheon Chief Executive Thomas Kennedy told Reuters. “It is the combination of those two that is leading to an explosion in the cybersecurity area.”

Raytheon, which is paying about $1.6 billion including debt for Websense, said it would combine its cybersecurity unit with the company. The deal is valued at $1.9 billion, net of cash.

Vista will then invest about $335 million for a nearly 20 percent equity stake in the new company, Raytheon said on Monday.

The new company, which will be headed by Websense CEO John McCormack, will be a separately reported business unit, Raytheon said. A board of directors will be formed for the new company and will include representatives of both Raytheon and Vista, the company said.

RBC Capital Markets was the lead financial adviser to Raytheon. Morgan Lewis & Bockius, Steptoe & Johnson and Wilson Sonsini Goodrich & Rosati were its legal advisers.

Citi was the financial adviser to Websense, while Kirkland & Ellis served as its legal adviser.

(Reporting by Sagarika Jaisinghani; Additional reporting by Andrea Shalal and Devika Krishna Kumar; Editing by Sriraj Kalluvila)

This article originally appeared on Recode.net.

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