Published on 16 November, 2007
Secure Design KK, the Japanese developer of biometrics fingerprint authentication technology, announces that it has reached an agreement to acquire 53.9% of Beyond LSI Inc ("BLSI"), a Japanese company which provides biometric fingerprint solutions for a wide variety of applications, such as cell phones, personal computers and physical access to its technologies for algorithms, LSI and embedded network systems.
BLSI was established by members of the Tokyo Institute of Technology.
Under the terms of the acquisition Secure Design will acquire 324 BLSI shares representing 53.9% of the BLSI voting capital for a total consideration of JPY 73m (GBP 327,354). The consideration will be satisfied by a cash payment of JPY 13m (GBP 58,296) and the issue of 2,000,000 new Secure Design ordinary shares (the "Consideration Shares"), representing approximately 4.9% of the enlarged share capital of the Company. The Consideration Shares rank pari passu with the existing ordinary shares.
The vendors include Japan Asia Investment Co., Ltd. ("JAIC") and Dr. Hiroaki Kunieda, both of whom will become shareholders in Secure Design. The remaining 46.1% BLSI shares will be retained by Dr. Hiroaki Kunieda, BLSI management and staff.
The transaction is conditional upon admission of the Consideration Shares to trading on AIM, which is expected to take place on or before 12 December 2007.
In the year ended 30 June 2007, BLSI reported a loss before tax of JPY 34.6 million (GBP 155,157) on turnover of JPY 48,841,515 (GBP 219,020). At 30 June 2007, BLSI had net assets of JPY 47,922,592 (GBP 214,900).
Rationale for the acquisition
Secure Design is seeking to integrate several vendors' fingerprint authentication technologies, which comply with ISO/IEC standard, in order to increase its market share. The short-term business goal is to become the major supplier of this technology in Japan by leveraging Secure Design's growing expertise. The Company has also established an alliance with Oriental Technology System in Taiwan and Sanyo Semiconductor in Japan to develop a next generation ultra thin semiconductor fingerprint image sensor that can be also used on smart cards.
BLSI has developed Application Specific Integrated Circuits (ASIC) for fingerprint authentication for smartcards, and has started delivering the ASIC to major Japanese card companies in the Japanese traffic ticketing card market. This is an important technology for Secure Design and acquiring BLSI saves time and resource in developing biometric smartcards. Secure Design has delivered its technology to another major Japanese card company which has a large share of the Japanese financial card market. The Directors estimate that the combined companies will have around 70% of the Japanese card market and Secure Design will be in a position to provide its biometrics smartcard solution to them following the acquisition. The Directors believe that it will bring a significant advantage in dominating the domestic market and provide technology leadership in this field.
The Tokyo Institute of Technology is recognised as one of the leading technology institutes in Japan, similar to the Massachusetts Institute of Technology in the US. As the directors of BLSI and the R&D staff also work for the institute, Secure Design will be able to utilise the highly qualified academic and industrial R&D resources.
This acquisition is in line with Secure Design's long-term goal of becoming a global provider of fingerprint authentication products and services. The acquisition of the BLSI brand name, its ASIC products and R&D development resources will reduce Secure Design's development cost and the time involved in finding new biometrics smartcard solutions. In addition, expansion of the sales network by the acquisition should enable Secure Design to increase both sales and profits, as it will open up new markets for its existing range of products.