Sourcefire, whose $225 million acquisition by Checkpoint Software was blocked by Washington in 2006, Friday rebuffed a $187.4 million takeover bid by Barracuda Networks.
Shares of Sourcefire, creator of the open-source SNORT threat detection software used by many government agencies, climbed $1.01, or 15.2 percent, to $7.64 in afternoon trading.
In a statement, Sourcefire said the offer by Barracuda “substantially undervalues” the company and “is not in the best interests of Sourcefire and its stockholders.”
In 2007, Sourcefire posted a net loss of $6.5 million and in February, E. Wayne Jackson, Sourcefire’s chief executive and chairman, announced he was stepping down once a replacement is found. The company plans to find a new chief executive officer and pursue its strategy, Sourcefire Chairman Joseph Chinnici said in a statement rejecting the Barracuda bid.
The unsolicited offer by Barracuda Networks on Thursday and its rejection a day later creates a standoff between two companies backed by Sequoia Capital.
Though Sourcefire is traded on the Nasdaq, Sequoia retained 1.3 million shares, or a 5.4 percent stake, as of April 9. New Enterprise Associates and Sierra Ventures also retain stakes in Sourcefire with stakes of 12.8 percent and 6.7 percent, respectively.
Aside from Sequoia, 6-year-old Barracuda’s backers include Francisco Partners.
Barracuda’s offer represented a 13 percent premium to the company’s closing stock price on Friday. In a letter to Mr. Jackson and Sourcefire’s board, Barracuda Chief Executive Dean Drako said that his company’s bid could “remedy” the threat of a lawsuit by Trend Micro. Trend Micro filed suit against open-source ClamAV, whose intellectual property was acquired by Sourcefire in 2007.
In 2007, Campbell, California-based Barracuda, whose e-mail and Internet anti-spam appliances are used by corporations like Coca-Cola, FedEx and IBM, acquired NetContinuum, a creator of Internet firewalls backed by Adams Street Partners and Menlo Ventures.
Research house 451 Group said Barracuda sought to bid for Sourcefire at a time of weakness.
“It is certainly an opportunistic offer, as FIRE has been burned on Wall Street,” said analyst Nick Selby. “A stiff-arm bid for your company from a CEO named Drako at a company called Barracuda has Harry-Potterian overtones, but the bid is consistent with Barracuda's overall marketing strategy. Sourcefire knew it was a matter of time before an overture was made by a larger security player, public or private.”
Seven-year-old Sourcefire, based in Columbia, Maryland, staged an $86.3 million initial public offering in March 2007.
The federal government’s Committee on Foreign Investments in the United States stepped in to pressure Israel-based Check Point Software to abort its acquisition of Sourcefire. In a government filing, Sourcefire acknowledged that it lost government customers when Check Point sought to acquire the company. Contracts with the U.S. federal and state and other national and state government agencies accounted for 8 percent of revenue as of March 31.