Software firm Check Point wishes to acquire rival firm Sourcefire. The stakes: control of national security software. Feds nix deal. Game over? Not yet: Check Point’s move.

The Register reports:

Check Point Software has dropped its bid for US rival Sourcefire after objections from the FBI and Pentagon were heard by the Treasury’s Committee on Foreign Investments [CFIUS].

The Committee has also overseen the recent rumpus surrounding the Dubai carve-up of P&O.

Federal agency objections to the security software tie-up centre on the implementation of Sourcefire’s anti-intrusion software ‘Snort’ by the Bureau and Department of Defense, AP reports. In private meetings between the panel and Check Point, FBI and Pentagon officials took exception to letting foreigners acquire the sensitive technology. If the $225m deal had gone ahead as announced back in October, Check Point would have got the rights to all patents and source code.

But wait, there’s more:

Check Point says the two companies will find ways round the roadblock. CEO Gil Shwed said: “We’ve decided to pursue alternative ways for Check Point and Sourcefire to partner in order to bring to market the most comprehensive security solutions.”

The Washington Post reports in more detail:

Sourcefire Inc., a 140-person network security company whose clients include U.S. intelligence agencies, agreed in early October to be bought by Check Point Software Technologies Ltd. for $225 million, but the companies called off the deal yesterday as the deadline loomed for the Committee on Foreign Investment in the United States to issue its findings on the proposed acquisition.

CFIUS is a panel with representatives from 12 agencies, including the Defense, Treasury and Homeland Security departments. It reviews foreign purchases of U.S. companies for possible national-security problems. The process is notoriously secretive, and executives of the companies involved are often not informed about which aspects of a deal may be raising national security concerns.

Check Point, which is traded on the Nasdaq Stock Market and has U.S. headquarters in Redwood City, Calif., said in a statement last night that the “timing for this acquisition may have been bad and given the respective technologies it became complex.” The company, based in Ramat Gan, Israel, and founded by Israeli tech pioneer Gil Schwed, sells a widely used network firewall system.

Sourcefire, a privately held company, was founded in 2001 by Martin Roesch. Its basic product, Snort, was originally developed in an open-source forum that enables computer programmers from around the world to see software code and modify it though the Internet. An advanced version of the product, which protects networks from viruses and attacks, was eventually privatized and sold commercially.

Last year, the company — which is well-known in Washington technology circles — brought in more than $30 million in revenue. Government clients, including the Defense Department, make up about 13 percent of that revenue, according to Wayne Jackson, Sourcefire’s chief executive.

Sourcefire is watched particularly closely in the Washington area because it has a number of local investors, including Core Capital Partners LP of the District, New Enterprise Associates of Baltimore, and the Maryland Department of Business and Economic Development. Perry said the company had not sought out an acquisition when Check Point approached the firm with an offer.

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Slashdot discussion.

Martin Roesche comments, October 2005 @ snort.org.