McAfee to Buy Network General for $1.3 Billion
Continuing its aggressive drive to become a powerhouse in computer networking software, McAfee Associates Inc. said Monday that it agreed to buy Network General Corp. for $1.3 billion in stock.
The combined company, to be called Network Associates Inc., would help McAfee dominate the market for network maintenance software aimed at the growing number of large companies that use Microsoft Corp. software on their computers.
Microsoft is gaining a larger share of corporate computer sales with its new NT operating system, and McAfee hopes to see its sales grow alongside Microsoft’s, said McAfee Chief Executive Bill Larson.
In the last four years, McAfee has used acquisitions to grow from a publisher of cheap anti-virus software to one of the biggest suppliers of sophisticated network management and security products.
In January, McAfee bought Jade KK, a closely held Japanese developer of anti-virus software for $21 million in stock.
Monday’s purchase would make McAfee the largest third-party provider of software for computers that use Intel Corp. microprocessors and Microsoft operating software. It would also be the 10th-largest software company in the world, McAfee said.
The acquisition of Network General would make McAfee an even stronger player, analysts said.
“They’ve had an unbelievable knack for timely, synergistic, high-yield acquisitions,” said John Powers, analyst at investment bank BancAmerica Robertson Stephens in San Francisco. “I’m pretty enthusiastic about this deal.”
Under the terms of the transaction, McAfee would offer 0.4167 a share, or about $27.66, for each share of Network General.
McAfee, based in Santa Clara, Calif., said it does not expect the acquisition to dilute its earnings, and expects unspecified savings in operation costs. McAfee executives said it is too early to tell if the combined company would shed workers.
The companies also have few products that overlap. McAfee specializes in anti-virus, network security and help-desk programs, while Network General, based in Menlo Park, Calif., specializes in diagnostic and performance monitoring products.
Executives said their combined product suite would make it easier for technicians on help desks to manage huge networks running on Microsoft Corp.’s Windows NT networking software.
“Network Associates has two emerging business opportunities, the Windows NT help-desk space and network security solutions,” said McAfee Chief Executive Bill Larson. “We have a strong wind in our sales in this marketplace.”
The new company would have net income of $130 million on revenue of $612 million. Larson said that based on the surging popularity of Windows NT and the need for management tools, his company’s revenue could rise between 30% and 40% for the next few years.
Larson will serve as chief executive and chairman of the new company. Leslie Denend, chief executive of Network General, will become president.
The transaction must be approved by shareholders at both companies and by U.S. antitrust regulators.
McAfee shares rose $2 to close at $66.38; Network General shares gained $2.50 to close at $23.38. Both trade on Nasdaq. McAfee’s purchase was announced after the market closed.
