HID Global to buy Fargo

Access control giant to get bigger, pending $300m deal
Saturday, July 1, 2006

IRVINE, Calif.--Access control giant HID Global and card issuance manufacturer Fargo Electronics jointly announced May 23 that both corporate boards have agreed to a deal where HID will acquire Fargo for an all-cash consideration of $25.50 per share, a total of roughly $325 million. News of the deal pushed Fargo stock up $8.48 that Tuesday to finish at $24.71, though it is subject to regulatory review and Fargo stockholder approval and likely won't close until the third quarter of this year.
For the deal, Fargo was advised by Raymond James and Associates, while HID Global employed the services of USB Investment Bank.
According to Forbes.com, Fargo brought in $82 million in revenues over the past year, earning $.76 per share. In the press release, HID Global chief executive officer Denis Hebert said, "We believe that we are now positioned as a leader in the rapidly growing market for secure issuance of corporate and national ID credentials."
"They're very focused on HSPD-12," reasoned Sandra Jones, a security industry consultant and analyst who heads Sandra Jones and Company. The presidential directive says that, by October, all government agencies and government contractors must be able to issue one biometric smart card to employees for control of both physical and network access control.
"What makes more sense," asked Jones, "[HID] trying to develop a technology from scratch, or taking on Fargo, which already has the branding and the product? It accelerates their time to market."
Though Hebert could not discuss the Fargo deal further than his press release comments until the deal is approved by Fargo's board and stockholders, "It is certain," he told Security Systems News, "that HSPD-12, FIPS 201 standards, and PIV smart card requirements will extend into quasi-government agencies, and certain commercial sectors such as government prime and sub-contractors. Other highly regulated industries such as the pharmaceutical, health care and financial sectors are likely to evaluate these initiatives for adoption as well."
For Alan Kruglak, president of independent integrator Genesis Security with a relationship with HID that goes back to the 1980s, the deal "means nothing. We're not going to do anything differently ... Will [prices] get lower? They could get lower." In the end, he said, "It will have very little influence."
Hebert seemed to agree: "HID Global is firmly committed to maintaining our focus on, and attention to, our highly-valued security integrator customers," he said of the potential for a consolidated company to affect the independent integrator. "There are several potential areas of interest between the two companies, but at HID, our customers always come first."