The Internet security company Verisign Inc. announced an $800 million acquisition agreement Monday that promises to put it in the top tier of on-line payment services competitors.
The leading provider of certificate technology for authenticating digital information or parties to an electronic transaction said it would issue 5.6 million common shares to buy privately held Signio Inc., an organization with close ties to several banks and credit card processors.
That was one of two deals disclosed by Mountain View, Calif.-based Verisign. It also said it would pay $575 million in stock for Thawte Consulting, a South African company that is prominent in the international digital certificate market and second only to its acquirer in the number of certificates issued.
The $1.4 billion spree indicated the potency of Verisign's acquisition currency and the credibility being gained by both the data security and on-line payments businesses - and the potential synergy between them. Verisign's stock price gained 19.1875 to close at $150.125.
As a result, Signio investors that include Bank of America Corp., Wells Fargo & Co., and Intuit Inc. increased their paper payoff by 14.65% during the trading day.
Verisign, a 1995 spinoff of the data encryption company RSA Security Inc., defines its product as "trust services to make e-commerce work," said president and chief executive officer Stratton Sclavos. He said the payment service of Signio, formed in 1995 and called PaymentNet Inc. until July, is one of the "three critical pillars" of the company's trust infrastructure strategy.
The others are authentication, as provided by digital certificates, and validation, a related function that can include assurance of the validity of a certificate and a digital notary function.
In common with other Internet vendors, particularly in the security area, Verisign is staking out a position and filling it out with what can be billed as an "end-to-end" capability.
"Verisign is clearly trying to position itself as the trust services provider of the Internet," said David Zale, an equity analyst at Sands Brothers & Co. in New York. "Signio fits in well on the payments side, because it has contracts with some key players in the business-to-business space."
Signio helps businesses accept a variety of payment types including credit cards, debit cards, and automated clearing house transactions. The Redwood Shores, Calif., company said it has almost 2,000 on-line merchants including CBS Sportsline, C/NET Store.com, wine.com and WebMD, and 200 resellers on its merchant network.
Signio fits "perfectly" with Verisign's electronic commerce aspirations, said John J. Puricelli, a software analyst at A.G. Edwards. It would help Verisign emulate in the virtual world the identification attributes and other assurances that purchases have in the physical world, he said.
"In the past, [Verisign] only had the identification piece," he said. "The acquisition is the logical next place to make the e-world and the physical world parallel."
Paul J. Dravis of Banc of America Securities in San Francisco said Mr. Sclavos had previously indicated interest in pursuing on-line transaction processing and that Signio is "a very consistent follow-through on Verisign's strategy."
The deal is likely to put Verisign in closer competition with companies that might have cause also to use its services or interoperate with them, such as Cybercash Inc. and Trintech Group. The latter only a few weeks ago announced an agreement to more closely integrate digital certificates into its on-line credit card software.
The purchase of privately held Thawte Consulting would solidify Verisign's digital certificate position, Mr. Sclavos said. "This truly sets the stage for Verisign to establish a global standard for validation on the Internet," he said.
Mr. Zale said Thawte would add 20,000 to 30,000 customers to the business-to-consumer side of Verisign's business.
Verisign, which in the third quarter reported $22.8 million of revenue and its first profit, expects to close both acquisitions during the first half of 2000.