Digital rights management company Aladdin Knowledge Systems on Thursday rejected an unsolicited takeover offer worth $13 per share from private equity firm Vector Capital, the owner of Aladdin rival SafeNet.

With about 13.9 million Aladdin shares outstanding, Vector’s offer would be worth approximately $180 million. Aladdin’s board also rejected Vector’s alternative offer of $125 million to $135 million for Aladdin’s digital rights management unit alone.

On the news, shares of Aladdin, based in Petah Tikva, Israel, shed $.67, or 5.3 percent, to $12.08 in afternoon trading on the Nasdaq.

San Francisco-based Vector, which tries to invest in mature technology companies when their price tags are low, also owns 1.4 million shares of Aladdin, or 10.2 percent of shares outstanding. Shares of Aladdin have recovered from their 52-week low of $8.29 but remain well off their high of $26.94.

In a statement, Aladdin said its board of directors had determined that the offers fail to recognize the company’s intrinsic value and strategic initiatives.

"We believe that these unsolicited proposals are opportunistic, significantly undervalue Aladdin, and do not fully recognize the value of our company or its DRM business,” CEO Yankl Margalit said.

Credit Suisse Securities is providing financial advice to Aladdin, and Kramer Levin Naftalis & Frankel is serving as U.S. legal counsel. Herzog, Fox & Ne'eman is Aladdin’s legal advisor in Israel.

Vector, which manages more than $2 billion in equity capital, was spun out of a family investment firm, Ziff Brothers Investments, in 1997. Vector made the offers for Aladdin through its Jasmine Holdco unit, which is representing Baltimore-based SafeNet.

After Aladdin disclosed Vector’s offer on August 20, Jasmine issued a statement in which Vector Principal David Fishman, a former investment banker for Goldman Sachs, said the company “would expect to retain and invest in the talented employees as well as Israeli location” after a deal with Aladdin.

O'Melveny & Myers and Meitar Liquornik Geva & Leshem Brandwein are acting as legal counsel to Jasmine.

SafeNet’s encryption technologies are used by UBS, Nokia, Bank of America, Cisco, Microsoft, and the Department of Defense. SafeNet was acquired by Vector in 2007.

In July, Aladdin acquired Secure Computing, an enterprise security company, for $65 million in cash. In a conference call after second quarter earnings, Mr. Margalit said the company planned to continue a merger and acquisition program to boost earnings. Second quarter earnings came in a $144,000, or $.01 a share, versus $3.9 million, or $.26 per share in the 2007 period on a 30 percent increase in operating expenses.

Aladdin makes DRM software designed to let software publishers prevent piracy and collect licensing fees. Its eToken unit provides two-factor user authentication through USB thumb drives.