BlackRock is in negotiations to take control of Cofense after US security concerns: sources

BlackRock, a Cofense investor, is in advanced talks to buy out the US cybersecurity company, after a US national security panel has asked the repurchase company Pamplona Capital Management to sell its stake, have said Sunday people close to the case.

The Committee on Foreign Investment in the United States (CFIUS), which examines the operations of foreign acquirers for potential national security reasons, did not reveal why it had asked Pamplona to sell its 47% stake in Cofense , based in Leesburg, Virginia, which helps protect email. users of phishing attacks.

This development is one of the few notorious examples of CFIUS canceling an agreement already concluded.

The Russian billionaire Mikhail Fridman is one of the leading investors in private equity funds Pamplona. He was included in a "watch list of oligarchs" of the US Treasury Department that could have imposed sanctions because of its potential links with the Kremlin.

However, unlike other Russian oligarchs such as Oleg Deripaska and Viktor Vekselberg, Fridman was not hit by US sanctions.

"The process is still ongoing and we are working diligently to find a solution," said Pamplona in a statement, refusing to comment further.

Representatives of BlackRock, Cofense, Friedman and the US Treasury, who chairs CFIUS, did not immediately respond to requests for comment.

Last October, Pamplona decided to launch an auction process to sell its stake after the CFIUS approached it. Pamplona made this decision 10 months after the acquisition of Cofense with BlackRock, as well as other investors, including Adam Street Partners and Telstra Ventures, under a $ 400 million contract.

BlackRock, which holds a 30% stake in Cofense, is the favorite to buy Pamplona's stake in an agreement that could be concluded as early as this week, sources said. However, it is still possible that another bidder wins or the negotiations fail, the sources added, asking not to be identified because the negotiations were confidential.

July 19, deadline reached with the CFIUS to reach an agreement on COFense, has already pbaded. The US government's involvement, which has formed an attorney with the company to oversee the sale, complicates the negotiations, sources said.

The protracted process also weighs on price negotiations. Pamplona is negotiating with BlackRock a deferred payment mechanism that will be based on Cofense's future financial results, which it hopes will eventually lead to a higher transaction value than the investment in the company. last year, sources said.

It is also possible, however, that the agreement will end up valuing Cofense, which was previously known as Phishme, lower than last year's $ 400 million valuation, the sources added.

Pamplona and BlackRock did not seek approval from CFIUS when they entered into a contract with Cofense last year because the control system is voluntary and the companies felt that no national security issues would be raised. 'after the sources.

The companies have trusted Cofense's management team, which also holds a stake in the company, to run the business, the sources added.

CFIUS has made cybersecurity and privacy the top priority in recent months. The Global Threat Assessment Report, published by the US intelligence community in 2019, documented Russia's efforts to interfere in the American political system.

As another example this year, when CFIUS was trying to unravel an acquisition, it had previously asked Chinese game company Beijing Kunlun Tech Co Ltd to sell Grindr LLC, the popular gay dating app it had owned since 2016. Grindr collects personal information provided by its users, including a person's location, messages and, in some cases, even their HIV status.

Last year, the CFIUS launched a pilot program in which filings for review for certain types of investments in certain US technology companies that it deems crucial are no longer optional.

Fridman and its partners control the Alfa Group, which includes the leading Russian private bank Alfa Bank, its largest food retailer X5 Retail Group and other badets.

Fridman, whose net worth is estimated at $ 15.9 billion by Forbes, is also one of the largest shareholders of LetterOne, which invests in the energy, telecommunications, technology and energy sectors. other.

Pamplona was founded in 2005 in London by the British negotiator Alexander Knaster, born in Moscow, who had previously held the position of CEO of Alfa Bank from 1998 to 2004. Last year, Knaster entrusted the management from Pamplona to co-manager Martin Schwab and William Pruellage.

Knaster remains president of Pamplona, ​​which manages more than $ 12 billion in badets across several funds.

BlackRock, the world's largest badet manager, is best known for being a mutual fund provider, but has also been investing in private equity since 1999. This year it raised $ 2.75 billion. for a long-term private equity fund with an interim fundraising goal. $ 10 billion.