Intel spins out McAfee security unit in private equity deal with TPG

McAfee: bought by Intel for $7.7bn, now valued at $4.2bn in private equity spin-out

Semiconductor giant Intel has spun out its Intel Security business to private equity firm TPG in a deal that values the business at $4.2bn - $3.5bn less than Intel paid for it six years ago.

Intel will receive $3.1bn in cash as part of the transaction and retain a 49 per cent minority stake, while TPG will take control with a 51 per cent share of the new company. It will also invest $1.1bn into the company.

Intel Security is based on the McAfee business that Intel bought for $7.7bn in February 2011 and renamed two years ago. The company will revert to the better known McAfee brand name. When the transaction closes, which is expected in the second quarter of 2017, Chris Young will become CEO of McAfee.

Currently general manager of the Intel Security Group, Young served as senior vice president at Cisco's Security Business Group before he joined Intel.

In an open letter to ‘stakeholders', Young described TPG as a "seasoned technology investor" that was "attracted to our current momentum and long-term potential". He claimed that McAfee currently protects "more than a quarter of a billion endpoints" and is present in two-thirds of the world's 2,000 largest companies, and protects the PCs of more than 200 million consumers.

Intel CEO Brian Krzanish claimed that security, nevertheless, "remains important in everything we do at Intel" and added: "We will continue to integrate industry-leading security and privacy capabilities in our products from the cloud to billions of smart, connected computing devices."

Bryan Taylor, partner at TPG, said that the private equity outfit had "long identified the cybersecurity sector, which has experienced strong growth due to the increasing volume and severity of cyberattacks, as one of the most important areas in technology".

The original $7.7bn acquisition of McAfee Security by Intel in 2010 was intended to enable the company to beef up security around PCs, selling McAfee anti-virus and other security software around its core business. However, the combination never worked, while the money to be made in the security business is increasingly becoming focused on the data centre and cloud computing.

Back in 2012, McAfee co-president Michael DeCesare described the acquisition by Intel as "one of the most profound things to hit IT".

He added: "We'll see a massive move forward in hardware-assisted security. You'll understand that the acquisition between Intel and McAfee was one of the most profound things to hit IT. My prediction will be a situation where customers will simply not buy endpoint unless [security] is tightly coupled with the machine it's on."