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Identity management firm Okta to buy Auth0 in $6.5 billion deal

(Reuters) - Identity management company Okta Inc said on Wednesday it has agreed to buy its smaller rival Auth0 in a $6.5 billion all-stock deal, one of the largest software deals so far this year.

Okta expects to leverage Auth0’s customer identification product to accelerate growth in the $55 billion identity market, as COVID-19 has pushed companies of all sizes to shift to remote working and interact with clients online.

Both Okta and Auth0’s cloud-based offerings help verify and secure the identities of an organization’s workforce and customers before they can access certain applications or websites.

While known for offering employee identification systems, Okta has been growing its customer identification business, which now accounts for a quarter of its revenue.

Bellevue, Washington-based Auth0 manages customers’ identities across applications and expects over $200 million in revenue this year.

“The customer part is growing faster than the workforce part,” Okta Chief Executive Todd McKinnon said in an interview. “We have 10,000 customers, and there are millions of customers that could use both of our solutions.”

Auth0 will operate as an independent business unit inside Okta, with both platforms integrated over time.

Okta also reported quarterly revenue of $234.7 million on Wednesday, an increase of 40%. The company’s share price has jumped during the pandemic, taking the San Francisco-based identity provider’s market cap to over $30 billion.

Okta approached Auth0 last year when the latter was gearing up for a public listing, said McKinnon.

Founded by Eugenio Pace and Matias Woloski in 2013, Auth0 has raised more than $330 million from investors including Bessemer Venture Partners and Salesforce Ventures. It was last valued at $1.9 billion in July.

The deal is expected to close in the second quarter. Okta’s shares were down 10% in extended trading.

Morgan Stanley advised Okta on the deal while Qatalyst Partners advised Auth0.

Reporting by Krystal Hu in New York and Ankit Ajmera in Bengaluru; Editing by Shounak Dasgupta and Richard Pullin

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