France’s SAFRAN Group this month agreed to acquire the biometrics business of Motorola [MOT] in a deal that would expand its already robust fingerprint matching business in the U.S. and globally.
Terms of the pending transaction were not disclosed. SAFRAN, which is doing the deal through its identity solutions business Sagem Securite, expects to complete the purchase in the first quarter of 2009.
“This acquisition allows Sagem Securite to strengthen its position in the U.S. market for homeland security where it is already committed to offer world class identification systems to government, state and local markets,” says Jean-Paul Herteman, SAFRAN’s CEO. He also says the deal is “an important step in our plan to improve our product offering, expand production in the U.S. and reduce costs.”
The Motorola deal is the second attempt this year by SAFRAN to acquire a U.S.-based firm in the identity solutions space. Over the summer SAFRAN tried to acquire Digimarc, the leader in providing driver’s license solutions to states, but was outbid by L-1 Identity Solutions [ID].
In the Motorola purchase, SAFRAN is only acquiring the company’s business that designs, develops, integrates and maintains automated fingerprint identification systems (AFIS) as well as the Printrak trademark, which is the name of the business. Two other product lines that are for incident and records management are not part of the deal.
Sagem and Motorola compete globally with Cogent Systems [COGT] and Japan’s NEC Corp. to supply governments and law enforcement agencies with AFIS capabilities that provide database matching of fingerprints. Stanford Group analyst Jeremy Grant believes the consolidation in the AFIS market is good news for Cogent given the elimination of a strong competitor. He also thinks that this could open doors for Cogent in the European market with both Sagem and Motorola are strong.
On the other hand, Grant believes that the pending deal is a “disappointment” for L-1, which he says has been pursuing the Printrak business to bolster its own capabilities in the AFIS space. However, Grant says in a note to clients that L-1’s AFIS capability appears to work well for smaller customer applications although it remains unproven relative to the larger AFIS providers in terms of landing a large contract.
Grant also believes that Sagem’s second attempt to buy its way further into the U.S. identity solutions space is a direct challenge to L-1, which so far has been the only consolidator in this area. He says that given the current tight credit markets and the fact that L-1 had to raise its bid to acquire Digimarc, likely made it difficult for the company to compete with Sagem for the Motorola business.
Morgan Keegan analyst Brian Ruttenbur says that in talks with Cogent’s management regarding the SAFRAN deal they told him that Cogent has been successful the past few years in winning business from Printrak, particularly in Puerto Rico, Houston and the Royal Canadian Mounted Police.
Motorola’s AFIS business has more than 300 customers in 40 countries in North America, Europe, the Middle East and Asia. Motorola acquired Printrak about 10 years ago. At that time Printrak had about $110 million in annual sales, according to Ruttenbur. He believes that Printrak is still about the same size today.