SSH Communications Security Corporation and State Security Networks Group Finland Form a Joint Venture
SSH Communications Security Corporation and State Security Networks Group Finland form a joint venture to commercialize the firewall technology developed by SSH
SSH Communications Security Corporation (”SSH”) and State Security Networks Group Finland (”State Security Networks”) have on June 21st, 2018 signed an agreement which makes State Security Networks a minority shareholder in Kyberleijona Oy (“Joint Venture Company”), a company founded by SSH. State Security Networks is a company fully owned by the State of Finland.
The purpose of the joint venture is to ensure that the technology developed by SSH protecting critical information networks will stay under domestic ownership. The transaction is expected to be completed no later than August 17, 2018 after customary closing actions have been completed.
At completion of the joint venture arrangement, SSH will own 65% and State Security Networks will own 35% of the Joint Venture Company.
SSH will transfer ownership to the source code of the firewall products to the Joint Venture Company as a contribution in kind and will grant a license to the SSH license portfolio necessary to operate the firewall business. State Security Networks will make an investment of EUR 1 million to the joint venture and further grant the joint venture a subordinated loan of EUR 162,000.
SSH will act as the global sales partner for the Joint Venture Company and also provide the necessary development and administrative services to the Joint Venture Company. SSH shall be compensated for the services on cost-plus basis. The agreements regarding the reseller relationship and the services have also been signed today.
As a part of the transaction, State Security Networks shall have an option to purchase SSH’s share of the Joint Venture Company under certain conditions, including a situation in which there is a significant change in the ownership of SSH or the effective control of SSH changes. If State Security Networks exercises its option, the purchase price will be determined using a pre-agreed mechanism customary in company acquisition situations. Under certain conditions, State Security Networks may also be obligated to purchase SSH’s share of the Joint Venture Company. In this case, the purchase price will be determined in a similar manner. SSH may also, with the permission of State Security Networks, find a domestic buyer for its share of the Joint Venture Company if SSH believes this will generate a better result for SSH shareholders.
The profits from the business of the Joint Venture Company will be divided among the owners in proportion to their ownership share with the provision that the Joint Venture Company shall retain sufficient resources to further develop the firewall products.
This arrangement will increase SSH’s resources to commercialize the firewall technology both in Finland and internationally and strengthens SSH’s position as a supplier of cybersecurity solutions that are critical for national security. The potential customers of the Joint Venture Company include the Finnish Government, large telecommunications service providers, and primarily European Governments and other national security related actors.
This transaction and the NCSA certification received by the firewall product makes it possible to use domestic technology to protect critical Finnish networks. SSH believes this arrangement enables the Joint Venture Company to participate in this business and at the same time preserves the freedom of SSH owners to contemplate various business arrangements.
The firewall products have been developed utilizing SSH’s more than 20 years of experience in cybersecurity and encryption technologies. The firewall products have been developed specifically to protect critical information networks against the constantly growing spectrum of cyberthreats. The first product arising out of this technology, SSH NQX™, is a combined firewall and VPN appliance that protects ICT systems and networks from unauthorized usage and interference. It provides strong encryption for Ethernet frames and IP packets using technologies that are compatible with future post-quantum cryptography algorithms (Quantum Ready). Several key technologies used in the product have been protected with international patents and patent applications.
Upon completion of the transaction, the Joint Venture Company will be consolidated into the SSH Group as a subsidiary and the non-controlling interest in the profit and equity will be separated. SSH estimates that the firewall product revenues enabled by this arrangement are material compared to the current revenue of the Group. The business is expected to commence during the second half of 2018 but the revenue impact during 2018 is difficult to assess and it will be separately commented in future quarterly results announcements.
“This transaction furthers two objectives important to us: improving the national information security of Finland and increasing our shareholder value,” says SSH CEO Kaisa Olkkonen. “The transaction combines the securing of domestic ownership of strategic cybersecurity technology and the enabling of sound and profitable business logic for SSH shareholders.”
SSH COMMUNICATIONS SECURITY CORPORATION
For further information, please contact:
Kaisa Olkkonen, CEO, tel. +358 40 579 5216
NASDAQ Helsinki Ltd.
About SSH Communications Security Oyj
SSH Communications Security is a leading provider of enterprise cybersecurity solutions that monitor, control, and automate trusted access to critical data. The company’s long track record of innovation includes Secure Shell (SSH) – one of the world’s most widely used network security protocols. Customers worldwide trust our flagship Universal SSH Key Manager® and other solutions to manage access, while greatly reducing costs and compliance risks. The Company sells direct through offices in North America, Europe and Asia and through a global network of certified partners. The company’s shares (SSH1V) are quoted on the NASDAQ Helsinki. For more information, visit www.ssh.com.
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