Raytheon Technologies [RTX] on Monday said it has agreed to sell its commercial cyber security business Forcepoint to the investment firm Francisco Partners, ending a five-year run with the business unit that struggled to be profitable as part of a major defense company.
Terms of the deal were not disclosed.
The former Raytheon Co. acquired an 80 percent stake in Websense in 2015 for $1.9 billion and, after combining it with some smaller cyber security businesses, renamed it Forcepoint. In the fourth quarter of 2019, Raytheon acquired the remaining 20 percent stake in Forcepoint for $588 million from former partner Vista Equity Partners.
Raytheon officials earlier this year, before the combination with United Technologies Corp. that created Raytheon Technologies, said the plan for Forcepoint going forward was to sell it.
Forcepoint had $658 million in sales in 2019 and an operating profit of $8 million. Raytheon bought the business when other major defense companies such as Boeing [BA], General Dynamics [GD] and Lockheed Martin [LMT] were about to sell their respective commercial cyber security businesses to focus instead on providing cyber security services and capabilities to their government customers.
Even without Forcepoint, Raytheon Technologies has a robust cyber security business with the U.S. and international governments.
Forcepoint, which is based in Austin, Texas, provides a variety of cyber security solutions to commercial, industry and government customers. The company says it has thousands of customers in more than 150 countries.
"We are proud to have built an industry-leading portfolio of security products that protect our customers' infrastructure, people, and data," Matt Moynahan, CEO of Forcepoint, said in a statement. "This transaction represents an exciting opportunity for Forcepoint to continue to innovate and drive growth with Francisco Partners. We believe that this partnership will help us to continue to invest in our products and organization while delivering increased value to our customers."
Thomas Kennedy, the former head of Raytheon who oversaw the company and the acquisition of Forcepoint until the creation of Raytheon Technologies, had forecast operating margins of 10 to 11 percent for the cyber security business in 2017 but the unit lost money some years before turning slightly profitable in 2018 and 2019. Operating margins the past two years were around 1 percent.
Francisco Partners said Forcepoint has a portfolio that is in demand by enterprises that need security.
"We look forward to working with the Forcepoint management team to help the company realize its full potential as an independent company while delivering enhanced value to the company's customers, partners and the end users its products protect," Andrew Kowal, a partner at Francisco Partners, said in a statement.
Raytheon Technologies will hold its third quarter financial results call Tuesday morning.