Information security specialist Aladdin Knowledge Systems has agreed to be acquired by an investor group led by Vector Capital, a private equity firm specialising in the technology industry, in a transaction valued at approximately USD160m.

Under the agreement, Aladdin shareholders will receive USD11.50 per share in cash for each share of common stock they hold.

This represents a premium of approximately 20 per cent over Aladdin's closing share price on 9 January 2009, the last trading day prior to today's announcement, and a premium of approximately 64 per cent over Aladdin's closing share price on 5 January 2009, the last trading day prior to Aladdin's announcement that it was in continuing discussions with Vector Capital regarding a possible strategic transaction.

Yanki Margalit, chairman and chief executive of Aladdin Knowledge Systems, says: 'After extensive negotiations and careful and thorough analysis, conducted with our independent advisors, the board has unanimously endorsed this transaction as in the best interests of the company and our shareholders.'

David Fishman, partner at Vector Capital (photo), adds: 'We are very excited about adding Aladdin to our portfolio of outstanding technology companies and believe that placing Aladdin's DRM and Authentication assets under common management with those of our portfolio company, SafeNet, a global leader in information security, makes considerable strategic sense and will greatly benefit all stakeholders.

'Aladdin is an exceptional company, with significant potential and a strong commitment to its employees, partners and customers worldwide. We understand Aladdin's industry and business well, and look forward to working collaboratively to ensure a smooth and expeditious transition.'

The transaction is subject to certain closing conditions, including the approval of Aladdin's shareholders, antitrust regulatory approvals, and the satisfaction of other customary closing conditions.

Approximately 14 per cent of Aladdin's outstanding shares in the aggregate are held by an affiliate of Vector Capital, and directors of Aladdin, including Margalit, have entered into a voting agreement for 19 per cent of the outstanding shares pursuant to which they have agreed to vote all of their shares in favour of the transaction. 

The transaction is expected to close following the satisfaction of all closing conditions, which is anticipated to occur in the next two to three months. Wells Fargo Foothill has committed to provide debt financing in support of the acquisition.