Viisage, Identix will merge in $770m deal

Biometric identity management company Viisage Inc. of Billerica will merge with Identix Inc. of Minnetonka, Minn., in a $770 million stock swap aimed at making the merged company a global leader in identity management.

''This combination is going to increase the business of both companies, because of the worldwide reach," said Viisage chairman Robert LaPenta. But the deal also signifies another erosion of Massachusetts' stature as a headquarters for high-tech businesses. Although Viisage will continue its Billerica operation, the head office of the merged company will be located in Stamford, Conn.

Biometrics is the science of identifying people by some physical characteristic such as the voice or fingerprints. Viisage is well known for its development of facial recognition systems, which enable a computer to compare digital images of people with photographs stored in a computer database.

However, the company's main business is the production of secure documents containing technology that makes it difficult for criminals to forge them. According to LaPenta, Viisage technology is used in about one-third of all US drivers' licenses and all of the nation's passports. Viisage also makes equipment that can quickly scan a document and determine whether it is authentic.

Identix also makes facial recognition systems. In addition, the company is a major supplier of fingerprint scanning hardware and software, as well as biometric database software that allows law enforcement officials to identify people quickly.

LaPenta said that a merger of the firms creates a company that can provide a full suite of identity management hardware and software to governments and corporations. He's particularly keen on Identix's fingerprinting products, because ''right now that represents over 60 percent of the market. So in order to be a major player in the market, you need that technology."

Both companies have recently posted losses. Viisage posted a loss of $4.2 million on revenues of $51.2 million for the nine months ending last September. Identix lost $13.9 million in fiscal 2005, which ended last June, on revenues of $73.8 million.

Rob Allen, who tracks the biometrics market for Frost & Sullivan of Palo Alto, Calif., said the industry ''is really primed for consolidation." Allen estimates that the North American market for such products was $527 million in 2004, but will rise to $1.4 billion in 2008. However, 60 companies in North America and 140 worldwide are vying for a piece of the action -- too many, in Allen's view. The Viisage-Identix deal will put the companies in a good position to dominate the market. ''This is the first company that has gotten all the pieces in place for identity management," Allen said.

Identix shareholders will get a little less than half a share of newly issued Viisage stock for each share of Identix stock. Viisage shares closed at $17.69 on Wednesday; based on that price, the deal will be worth $770 million. Viisage and Identix officials predict that the merged companies will generate 2006 revenue of $220 million and earnings before taxes, depreciation, and interest of $40 million.

LaPenta will become chairman and chief executive of the merged company, which has not yet been named. The company will have about 700 employees, though some redundant jobs will be eliminated. Viisage and Identix will continue to operate at their current locations, despite the relocation of company headquarters.

Hiawatha Bray can be reached at bray@globe.com.