SafeNet calls off bid for nCipher

SafeNet, the Baltimore-based maker of encryption products to protect computers, has pulled its £86m takeover offer for nCipher, its UK rival, blaming the Office of Fair Trading's decision to refer the case to the Competition Commission.

SafeNet said considerable time and expense would be incurred if it proceeded with its bid.

The OFT had referred the offer after an initial inquiry showed customers were wary of the two IT security hardware suppliers combining as they would own the majority of the UK market, creating anti-competitive conditions.

The Cambridge-based nCipher, whose shares fell 7.5p to 245p on the news, said it agreed with SafeNet's position, given the cost and potential disruption that could ensue from the Competition Commission case. The group has £40m in the bank.

Alex van Someren, the chief executive of nCipher, said he would continue with "business as usual" spending the next two weeks visiting clients in the US and Asia. Mr Van Someren and his brother, who started the business together, own 8 per cent of nCipher.

SafeNet agreed in February to buy nCipher to gain European financial clients such as Deutsche Bank. Safenet, which specialises in identity fraud protection, has clients including Nokia. It lowered its first-quarter results forecast to reflect the abandoned transaction.

SafeNet's takeover offer initially lapsed on 31 March when the company said it was "considering options".