U.S. Objections Scuttle Takeover

A leading Israeli software company abandoned its plans Thursday to buy a smaller U.S. rival in a $225-million deal because of national security objections by the Bush administration.

Check Point Software Technologies Ltd. in Ramat Gan, Israel, formally withdrew its proposal near the conclusion of a rare full-blown investigation by a U.S. review panel over the company’s plans to buy Sourcefire Inc.

Check Point had been told U.S. officials feared that the transaction could endanger some of the government’s most sensitive computer systems.

Lawyers for Check Point offered to attach conditions to the sale that executives believed were onerous but were intended to satisfy the concerns expressed by the review panel, the Committee on Foreign Investment in the United States, said one person familiar with the process. But no agreement could be reached.

The Treasury Department, which oversees the committee, formally accepted Check Point’s request to withdraw from the review. This ensures that the panel will not be required to submit recommendations to President Bush on whether to block the deal.

The committee has concluded only 25 full-blown investigations in more than 1,600 business transactions it has reviewed since 1988.

In roughly half the investigations, companies pulled out of the deal rather than face imminent rejection.

George H.W. Bush is the only president ever to have blocked a deal, stopping the sale of a Seattle aircraft parts manufacturer to China in February 1990.

The objections by the FBI and Pentagon were partly over specialized intrusion detection software known as Snort, which guards some classified U.S. military and intelligence computers. Snort’s author is a senior executive at Sourcefire, based in Columbia, Md.