CyberArk Surges on Report of Takeover Talks With Check Point

  • CyberArk shares had lost 49 percent from their peak in June
  • Check Point CEO bought two cybersecurity startups in 2015

CyberArk Software Ltd. surged the most in more than a year on a report the cybersecurity company is in initial merger talks with Check Point Software Technologies Ltd.

Check Point, the world’s top firewall provider, is in early negotiations to acquire CyberArk, Israeli newspaper The Marker reported, citing unnamed sources. Shares of Jerusalem-based CyberArk, which focuses on privileged-account security inside corporate networks, jumped 21 percent to $45.78 at 12:47 p.m. in New York after earlier rising as much as 25 percent, the most since November 2014. Check Point rose less than one percent to $79.03.

Shares of CyberArk, which went public in September of 2014, more than tripled in value through mid-June as a rash of high-profile data breaches fueled bets corporations would expand their security budgets. The stock had been cut nearly in half from that peak amid concern the pace of growth in the industry would slacken and valuations had reached excessive levels.

Check Point’s Chief Executive Officer Gil Shwed has used his considerable cash hoard to step up efforts to defend against younger competitors, buying two cybersecurity startups last year, his first acquisitions since 2011. While a potential deal with CyberArk, with a market capitalization of $1.4 billion, would mark a significant shift from Shwed’s prior tuck-in acquisition strategy, the combination would make sense, analysts at JPMorgan Chase & Co. and Barclays Plc said Wednesday.

Low Probability

“If such a transaction were to occur, we think the financial benefit to Check Point would be a net positive with added growth and expense synergies long term,” Barclays analyst Saket Kalia wrote in a research note. CyberArk “represents a specialist in a growing market and this is not the first time we have heard news rumblings.”

Press officials at Check Point and CyberArk declined to comment on acquisition rumors.

Other analysts think the chances of a tie up between the two Israeli security companies is unlikely. With Check Point’s $3.6 billion in cash, financing a takeover would be "no hurdle,” Oppenheimer & Co. analyst Shaul Eyal wrote in a note Wednesday. However, because of the smaller size of Checkpoint’s most recent acquisitions (both under $200 million), “we currently assign such a transaction a low probability,” he wrote.

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