Viisage to Acquire Firm With Fingerprinting Expertise

Viisage [VISG] recently said it plans to acquire Integrated Biometric Technology (IBT), a software firm specializing in fingerprinting services and solutions to federal, state and commercial customers, in a $60 million deal that would allow Viisage to package more complete biometric solutions for its customers.

"Identity solutions that combine leading face recognition and fingerprint solutions with high security credentialing technologies are increasingly in demand," Bernard Bailey, president and CEO of Viisage, said in a statement. "The addition of IBT's expertise in fingerprinting solutions to our existing identity solutions platform is expected to be a very attractive solution for both existing and prospective customers. By combining our two companies' valuable management resources and assets at the federal and state level, along with IBT's penetration into the financial services sector, we believe we are clearly positioning Viisage to achieve sustainable long-term growth."

Currently Viisage's key capabilities are in facial recognition software and solutions, document authentication technology and secure credentials such as drivers' licenses and passports.

The deal would also give Viisage access to a new customer, the Transportation Security Administration, which last year awarded IBT a multi- million dollar contract that could ultimately be worth over $100 million. Under the contract IBT has deployed a network of electronic fingerprint capture devices throughout the U.S. to process applicants and provide criminal background checks and screening for drivers in 34 states seeking hazardous materials transportation licenses.

IBT was considered a "dark horse" when it won the TSA contract over two larger competitors last year and the agency is "extremely pleased" with the company's execution on the contract so far, Robert LaPenta, chairman and CEO of L-1 Investment Partners, which is providing the initial capital for the acquisition, said on a conference call with Viisage's management.

The government estimates a backlog of about 2.7 million hazardous materials drivers that need to be processes for licenses, he said. Currently IBT is processing about 15,000 applicants per month and will soon be increasing that amount, he said.

Moreover, LaPenta said the contract also offers the potential to be leveraged in other TSA programs such as the Transportation Worker Identification Credential and the Registered Traveler Program. IBT's core capability is in software that it co-owns with Lockheed Martin [LMT], which is a subcontractor on the TSA contract, and has full use of, he said.

The acquisition would also expand Viisage's relationships with a number of state motor vehicle departments.

Moreover, the three largest U.S. banks are IBT customers.IBT's software solutions are interoperable with back end databases currently in use, such as the FBI's Integrated Automated Fingerprint Identification System, Viisage said.

The acquisition will be completed through a combination of cash and stock, although L-1 will make a $35 million cash down payment for IBT. Once L- 1's investment in Viisage is completed, which is expected in mid-December, Viisage would pay back L-1 the price of the down payment and issue five million new shares of its stock, worth about $25 million, to complete the IBT purchase.

IBT has done about $15 million in sales so far this year and Viisage expects it to bring in between $30 million and $35 million next year based upon existing contracts.

The deal is expected to add two to three cents earnings per share to Viisage next year as well. IBT is profitable and has no debt, LaPenta said.

The price of the deal is about nine to 10 times IBT's estimated earnings before interest, taxes, depreciation and amortization next year, he said.

Of L-1's $100 million investment in Viisage, which gives it a 28 percent stake in the company, $85 million is for acquisitions. After the IBT deal closes, Viisage will still have $50 million for additional deals.

LaPenta, who will be Viisage's new chairman once L-1's investment is approved, said on the call that he has looked at over 75 companies in the identity solutions space and there a "number that warrant further consideration."

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