Rainbow Technologies Now Owns ‘Clipper Chip’ Maker

Rainbow Technologies Inc. has completed the acquisition of the Torrance-based maker of a controversial computer encoding device, executives said Thursday.

Rainbow shareholders approved the purchase of Mykotronx at the company’s annual meeting Wednesday. Mykotronx had been privately held, and its owners will receive 1.82 million shares of Rainbow stock--making the deal worth $37.9 million based on Rainbow stock’s closing price of $20.875 per share Thursday.

As a unit of Rainbow, Mykotronx will continue to supply military and commercial computer security equipment, company executives said.

Mykotronx’s best-known product is a circuit known as the “clipper chip,” which the federal government had proposed as a standard for all telephones and computer communications devices. The chip would have made it easier for officials to eavesdrop on private communications.

In the face of criticism from privacy advocates, however, the government abandoned a proposal to require the chip in new equipment.

Mykotronx, with 65 employees, will remain in Torrance as a unit of Rainbow.