ALEX BRUMMER: Cyber security firm Avast has been sold on the cheap 

Cyber security, protecting firms and citizens, is both necessary and controversial. Barely a day passes without grim tales of digital extortion.

Poly Network, which links digital ledgers across the globe, says hackers looted some £432million of cryptocurrency.

Israel’s NSO Group provided cyber security software to autocratic clients who promptly used it to snoop on opponents and world leaders.

Cyber spree: Poly Network, which links digital ledgers across the globe, has just revealed that hackers looted some £432bn of cryptocurrency

The boom in cyber abuse explains why London-quoted, Prague-based Avast has fallen into the hands of Arizona competitor Norton for up to £6.2billion.

As one of the few cyber firms quoted in London, Avast has attracted a big institutional following. 

Unlike Britain’s undervalued aerospace and defence companies, Meggitt and Ultra, the cyber firm sells at a premium to its counterparts on Nasdaq.

When cyber software group Darktrace did an initial public offering this year there was scepticism because it was backed by Mike Lynch, currently fighting extradition to the US over fraudulent accounting allegations.

Investors who backed Darktrace have been rewarded, with the shares spurting from 330p to 617p in latest trading, placing a market value of £4.3billion on the enterprise. 

At its core, Avast is a Czech rather than a UK enterprise, so it is hard to criticise the merger with Norton on security grounds.

UK funds which enthusiastically embraced Avast might have a beef. There is almost no premium involved in the transaction.

Contrast this with the bidding war for aerospace group Meggitt, where the premium is above 70 per cent.

The industrial case for the deal is stronger than the financial justification. Together, the two companies will have 500m-plus users focused on cyber safety.

Microsoft is a big customer for Avast software. But the Silicon Valley giants increasingly are building their own cyber defences into products.

As time marches on they are as likely to be competitors rather than customers, so scale provided by a Norton-Avast combination would be useful.

The deal is described as a ‘merger’ but in effect it is a takeover, with Avast shareholders being offered Norton cash and paper.

Avast chief executive Ondrej Vlcek will be president, working alongside his opposite number Vincent Pilette at Norton. Such doubling up of roles rarely works for long. In an age when big battalion investors have become used to FTSE premiums, the weak takeout price could well trigger a revolt.

Raw deal

Nigel Rudd is among the great City dealmakers. In his early years at Williams Holdings it was all about buying companies at the best price.

Latterly, he has earned the sobriquet ‘Sir Sell-off’ for his skill in disposing of solid British enterprises such as Pilkington, Boots and Invensys at fancy prices.

It looked as if he was onto a sure-fire winner when he agreed to take the American shilling and sell Meggitt to Parker-Hannifin.

The shares’ 70 per cent premium appeared hard to better and Parker, which already has similar sized operations in Britain, is a respected Rolls-Royce supplier. 

Broader implications of loss of UK intellectual property, skills and R&D, the impact on national security and the potential for vanishing corporation tax are skimmed over.

Rudd and the other independent directors at Meggitt have been too clever for their own good. They jumped in Parker’s direction without even considering whether there might be a better deal.

Along comes Transdigm, which proclaims a private equity business model, to interfere, offering a 900p a share – an extra pound. Meggitt’s board says the Parker offer remains ‘an attractive’ proposition.

The reality is that a different chairman to Rudd might have kept Parker at a distance and gone it alone. Now the board risks being hoist on its own fiduciary petard.

All’s Wells

Mike Wells has done a good job in breaking up the Prudential.

But it is not done just yet. The latest earnings are more than wiped out by a chunky £5.4billion goodwill writedown at US offshoot Jackson Life, which is being spun out.

The Pru also plans a capital-raising of up to £2.2billion as it continues its exciting Asian expansion. Canadian-born he may be, but chief executive Wells appreciates the virtue of a trusted British brand.

At a time of geopolitical uncertainty in Hong Kong and China, he also recognises the value of a City HQ and quote.

This post first appeared on Dailymail.co.uk