Anticipated acquisition by Websense, Inc of Surfcontrol plc

Affected market: IT security solutions

No. ME/3023/07

Please note that the full text of the decision can be downloaded by using the link on the right. What follows are extracts regarding the parties, the transaction, jurisdiction, third party comments, assessment and decision.

The OFT's decision on reference under section 33(1) given on 6 July 2007. Full text of decision published 1 August 2007.

Please note that square brackets indicate figures or text which have been deleted or replaced with a range at the request of the parties for reasons of commercial confidentiality.

PARTIES

Websense Inc (Websense) is a US-based provider of software-based secure content management (SCM) solutions. The core product base of Websense is web filtering solutions. For the year ended 31 December 2006 Websense had a global turnover of $179 million (approximately £90 million).

SurfControl plc (SurfControl) is a UK public company and has operations worldwide, primarily in the USA, UK and Australia. SurfControl provides a range of IT security solutions, focussing primarily on SCM, and within SCM, on content filtering (web and email). Its UK turnover for the year ended 30 June 2006 was [< £70 million].

TRANSACTION

On 26 April 2007 Websense and SurfControl reached agreement on the terms of a recommended pre-conditional cash offer for the entire issued and to be issued ordinary share capital of SurfControl. The 40-working-day administrative deadline expires on 6 July 2007.

This transaction has also been notified in the USA and received regulatory approval on 4 June 2007.

JURISDICTION

As a result of this transaction Websense and SurfControl will cease to be distinct. The transaction satisfies the share of supply test under section 23 of the Enterprise Act (the Act) as the parties' combined share of supply in the UK for web-filtering solutions exceeds the 25 per cent threshold.

The OFT therefore believes that it is or may be the case that arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation.

THIRD PARTY VIEWS

The majority of third parties contacted did not raise any concerns about this transaction. The concerns raised have been dealt with above. All respondents, including those who have raised concerns, have mentioned several other suppliers that would continue to constrain the parties post-merger.

ASSESSMENT

The parties principally overlap in the supply of web filtering products. Post-merger they will hold a combined share of [40-50] per cent in this segment (both UK and globally).
 
However, independent reports available to the OFT and third party responses indicate that post-merger several other competitors will continue to constrain the merged entity, in particular Symantec, 8E6 Technologies, Clearswift and Blue Coat. In addition there is evidence of a growing trend towards integrated SCM solutions which has attracted several large IT security companies, which will further constrain the parties going forward.

Consequently, the OFT does not believe that it is or may be the case that the merger may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.

DECISION

This merger will therefore not be referred to the Competition Commission under section 33(1) of the Act.

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