Private equity house Vector Capital, in a bid to augment its computer security portfolio, has agreed to pay $160 million for hardware authentication firm Aladdin Knowledge Systems, the companies said Monday.

Shares of Aladdin, based in Kfar Saba, Israel, climbed $1.39, or $14.5 percent, to $10.99 in Monday afternoon trading.

Daniel Ives, a Friedman, Billings, Ramsey & Co. analyst, said in a research note that Vector’s plan to combine Aladdin’s authentication token technology with that of its portfolio company, computer security firm SafeNet, “should result in a much more efficient combined entity that will have a major stronghold on its digital rights management segment.”

Software tokens are randomly generated numbers designed to ensure that computer services are provided only to authorized users. Mr. Ives said the market for token could become “increasingly competitive” as rivals cut prices.

The $11.50 per share cash offer represents a 20 percent premium over Aladdin’s closing share price on Friday. The deal is subject to regulatory and shareholder approval and is expected to close within three months. Wells Fargo has agreed to provide debt financing for the deal.

"After extensive negotiations and careful and thorough analysis, conducted with our independent advisors, the board has unanimously endorsed this transaction as in the best interests of the Company and our shareholders," Yanki Margalit, chairman and CEO of Aladdin, said in a statement.

Mr. Ives said that Aladdin, the No. 1 software token authentication vendor, faces “intense competition” from rival software security companies, including Macrovision, RSA Security, and Trend Micro.

The portfolio companies of San Francisco-based Vector also include Corel, Netgravity, Niku, and RealNetworks.