By Calvin Biesecker

L-1 Identity Solutions [ID] yesterday said it as agreed to acquire Bioscrypt Inc., a Canadian-based firm specializing in biometric access control primarily for commercial customers, for about $44 million in a stock-for-stock transaction.

The deal, which is expected to close early this year, would give L-1 a position in both the biometric physical and logical access control space as well as far more exposure to the commercial market than it currently has.

“What this does is round out our portfolio,” Robert LaPenta, L-1’s chairman, president and CEO, told Defense Daily yesterday. “Because when we talk about biometrics solutions, we talk about the database, we talk about the modalities, we talk about the ability to accumulate data, to store it and then match it. What this does is bring it out to the edges of that whole network. We’re talking about prisons, about healthcare facilities, financial institutions, government facilities. And when you look at their customer base, many of these are people in the commercial and government pace are people that we ultimately want to sell to.”

Bioscrypt’s customers for physical access control include integrators such Kronos, Honeywell [HON], Lenel [UTX], and ADI.

In addition to pulling L-1’s product through Bioscrypt’s existing customer base, LaPenta believes there is ample opportunity to pull through Bioscrypt’s biometric reader products to offer L-1’s array of government customers.

In the logical access control market, where Bioscrypt’s VeriSoft software application is included on over 20 million Hewlett-Packard [HPQ] computers, LaPenta said L-1 will now have the ability to sell computer makers and financial institutions.

While the majority of Bioscrypt’s reader technology is fingerprint based, the company also offers a 3-D facial recognition reader, which it has sold to a large casino to provide access control for over 12,000 employees. LaPenta said L-1 plans to introduce its iris recognition technology into Bioscrypt’s reader products.

Citing research reports, L-1 says the electronic access control market is estimated to be valued at $2.1 billion, with just over 10 percent of that related to biometric based products.

L-1 believes the access control market is “poised for rapid growth in the commercial, homeland security and military sectors,” LaPenta said.

LaPenta also said that Bioscrypt, through its facial recognition technology, also offers L-1 additional capabilities such as real-time identification and facial recognition on the move.

L-1 said the deal is expected to add $20 million to its sales this year. LaPenta said that on a net basis the deal would likely take a penny or two from L-1’s earnings this year due to depreciation, amortization and options expense. L-1 plans to issues about 2.5 million shares of its stock in connection with the purchase. The company also plans to buy back between 500,000 and 750,000 shares of its stock.

Bioscrypt has over 400 global customers and in installed base of over 260,000 access control units.