Apple Inc (AAPL.O) will buy fingerprint sensor technology developer AuthenTec Inc AUTH.O for about $356 million, striking a deal that could put its iPhone at the center of the emerging mobile payments market.
Shares of AuthenTec, whose sensor chips can be used in personal computers and mobile devices, closed above the $8 per share that Apple agreed to pay for the company, suggesting some investors expect a rival bid.
Apple is paying a 58 percent premium for the Melbourne, Florida-based AuthenTec, which counts Korean mobile device maker -- and fierce Apple rival -- Samsung Electronics Co Ltd (005930.KS) among its biggest customers.
AuthenTec is one of the very few public companies that Apple has acquired. The world's most valuable technology company rarely does acquisitions and tends to buy mostly startups when looking for cutting-edge technology.
AuthenTec, spun off from Harris Semiconductor in 1998 and which went public in 2007, provides mobile security software licenses to companies like Samsung, and fingerprint sensor technology to computer makers such as Hewlett-Packard Co (HPQ.N) and Dell Inc DELL.O.
Its fingerprint technology, used in mobile phones in Japan for authentication of mobile payments, could help Apple bring those services to markets such as the United States, where mobile-wallet services have been slow to catch on.
Shares of AuthenTec surged $3.35, or 66 percent, to $8.42 on Nasdaq. Apple stock closed up $10.28 to $585.16.
BSW Financial analyst Hameed Khorsand said the offer price was not high enough to keep competing bids at bay, and the California mobile giant is validating AuthenTec's technology with its interest.
"There could be other parties interested in taking a serious look at purchasing AuthenTec," he said. "If not for the technology AuthenTec owns, then for forcing Apple to pay up."
Analysts see Google Inc (GOOG.O) and Samsung as potential rival bidders. The terms of the deal do not permit AuthenTec to shop for offers, but does allow it to consider unsolicited bids.
Piper Jaffray advised in the deal. The company has agreed to inform Apple if it receives any inquiries or offers. Apple has to pay a termination fee of $20 million in case the deal does not close because of antitrust issues. If AuthenTec goes for a higher, rival bid, it will have to pay Apple $10.95 million.
APPLE ALSO ACQUIRING PATENTS
AuthenTec, which also counts Lenovo Group Ltd (0992.HK) and Fujitsu Ltd (6702.T) as customers, has annual revenue of about $70 million and has itself been acquiring companies that would help in building a host of mobile security products.
"In the past 5 years, the growth of iPhone and Android smartphones has made mobile data security essential, not just a 'nice-to-have' feature," said Ben Yu, Managing Director of Sierra Ventures, one of the early investors in AuthenTec. "People have their whole lives on the phones."
AuthenTec's embedded fingerprint scanners and other identity-related software is particularly useful now that Near Field Communications, or NFC-enabled, phones have begun to appear in the market, he added.
At the Black Hat conference in Las Vegas this week, security experts demonstrated ways to attack Android smartphones using NFC. The technology allows users to share photos with friends, make payments or exchange data simply by bringing phones within a few centimeters of similarly equipped devices, such as another phone or a payment terminal.
An Apple spokesman declined to comment on how Apple plans to use AuthenTec's technology.
Apple has also acquired the right to pay the company to license certain patents totaling as much as $115 million. It will also pay AuthenTec $7.5 million for some product development work.
The exact nature of the work was not disclosed but the agreement filed with regulators hinted at the development of "a 2D fingerprint sensor for Apple that is suitable for use in an Apple product."
Some analysts expect the next version of the iPhone to include some form of mobile payments technology.
Apple will debut in the fall its "Passbook" software, a mobile app for storing tickets, coupons and loyalty cards. Passbook marks Apple's entry in the mobile payment space, an area that requires top-notch embedded security.
While companies such as Google already have mobile payments offerings, such services are not widely used in the United States and have been dogged by security concerns.
BGC Partners analyst Colin Gillis said AuthenTec technology could potentially also help Apple combat problems such as theft of its more portable products such as iPhones.
"If they could have a way where they could tie the phone to a user more tightly, that would make sense for them," he said.
He described the price tag for AuthenTec as a drop in the bucket of Apple's cash pile of $117.2 billion, and noted the company had not been as acquisitive as other technology firms.
"We'll see if it's a one-off or if Tim Cook will start to level his cash balance and acquire talent," Gillis said, referring to Apple's chief executive.
(Additional reporting by Himank Sharma in Bangalore; Editing by Ted Kerr, Bernadette Baum, Steve Orlofsky and David Gregorio)