US probe prompts Russia-linked Pamplona to sell stake in cybersecurity firm Cofense

Updated: There has been "strong interest" in the sale.
Written by Charlie Osborne, Contributing Writer

Pamplona Capital Management is seeking a buyer for its stake in cybersecurity firm Cofense following an investigation by US national security officials over national security.

Cofense said on Wednesday that Pamplona will sell its stake now that the Committee for Foreign Investment in the United States (CFIUS)'s probe has concluded, as reported by the Wall Street Journal

Once known as PhishMe, Cofense was acquired by an investment consortium in 2018 in a deal which valued the cybersecurity training firm at $400 million.

BlackRock and Pamplona inked the deal to acquire Cofense. The investment group owns a controlling stake, whereas Pamplona owns a minority stake. 

CFIUS conducted an investigation into the buyout in consideration of Pamplona's ties to Russia, given the investment company has partial backing from Russian billionaire Mikhail Fridman. However, it is important to note that CFIUS has not displayed any concerns related to Pamplona's business activities or investment in itself, but rather, this backing tie alone.

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The US has increased its scrutiny of foreign-backed ownership deals in the technology space within the past few years; a change in stance highlighted by President Trump personally stepping in and banning the aggressive takeover of Qualcomm by Broadcom due to links with China. Trump cited "evidence" that the proposed acquisition would be a threat to national security and so squashed Broadcom's plans.

The US has also banned Huawei equipment usage in government applications due to the same concerns of foreign influence.

While tensions continue to simmer between the US and China, Russia, too, has faced criticism for reportedly interfering in the US presidential elections.

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According to Cofense, CFIUS contacted Pamplona a month after the ownership deal was secured and an investigation was performed over the course of a few months, leading to the investor's voluntary decision to sell its stake.

An agreement between Pamplona and CFIUS has been reached to complete the sale by July 2019.

A source speaking to ZDNet said there has already been "strong interest" in the sale, with the first round of bids submitted earlier this week. The sale is being managed by investment banking advisory firm Evercore.

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"Cofense continues to cooperate with CFIUS and to comply with all prescribed actions as a result of this investigation," Cofense told the WSJ.

Pamplona declined to comment.

Update 14.24 BST: Updated to clarify that Pamplona owns a minority stake. In addition, Rohyt Belani, CEO of Cofense told ZDNet:

"Fortunately, the impact has been minor and the fundamentals of our business haven't changed. We are still focused on delivering the best possible products to the market to meet the needs of our global customers. 

Cofense's last two quarters were the best in company history. Our innovation pipeline is rich and we have earned our customers' trust by working hard and providing the support and technology they need to stop phishing attacks in their tracks. We look forward to closing this chapter out and continuing to grow the company while delivering outstanding services to our clients."

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