US Co BindView Development Agrees to Buy Israeli Start-up Netect in $35 Mln Stock Swap

This comes after Capital parted from its real estate businesses in New York at a profit of $30 million last month.

These are satisfying times for investors in the Capital group, controlled by Ronen Peled and Shimon Winetraub. Within a month, the group has announced the realization of a second investment at a large profit. In December, Capital signed an agreement with its US partner enabling it to sell him the real estate assets it bought in New York at the beginning of the decade at a profit of $30 million.

Today, the group confirmed that it also expected to realize its investment in Netect, a software house set up in July 1996, which is developing a series of security products for communications networks.

The shareholders in Netect have signed an agreement to sell it to US software house BindView Development in a stock swap deal. BindView (Nasdaq: BVEW), traded on Wall Street at a value of $503 million, deals in management programs for computer systems, with an emphasis on information security.

BindView was listed for trading on Nasdaq in July 1998, and since then its shares have more than doubled in price, on volatile trading. The company has 178 employees, and its business results show annual sales of $100 million, and a loss of $20 million.

The deal, still subject to examinations by both parties, will be done at the current value of the US company’s stock, with the overall proceeds from the sale of Netect amounting to $35 million (6.5% of the shares in the US company).

Capital holds 15% of the shares in Netect, founded by David Alouche, Danny Kaminsky, and Noam Sabo. Its share in the deal is $5.5 million, and the profit that will accrue to it is $3.3 million.

If the deal is completed, the shares Netect’s sellers will receive in BindView will be listed for trading on the US stock market in July 1999. Until then, the proceeds will be subject to the risks and opportunities arising from market fluctuations, the acquiring company’s business performance, and the high volatility of companies of this kind.

Apart from Capital and the founders, Netect’s owners include Noga Electrotechnica and investors generally involved in companies in this kind, such as Evergreen, Genesis Partners, Oppenheimer Partners, Delta Capital partners International, and others.

Capital made its investment in Netect at a negligible value. Netect made a private placement in November 1997 at a company value of $8.5 million, and a further private placement in August last year at a value of $17 million.

Netect has developed software intended for examining the security systems of computer networks. It simulates a break-in to the system, and warns the organization of loopholes in its security network. Netect’s products were integrated into those of BindView, the acquiring company’s aim being to complete with the world leader in network security, ISS.

See: Arena Weekly Start-up review of Netect

Published by Israel's Business Arena on January 31, 1999

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