WASHINGTON, Feb 28 (Reuters) - The U.S. Justice Department said on Thursday it was requiring Thales SA to divest its general purpose hardware security module (GP HSM) business in order for Thales to proceed with its proposed acquisition of Gemalto NV.
French defense electronics maker Thales and Netherlands-based chipmaker Gemalto are the world's leading providers of GP HSMs, which generate keys and encrypts data, and are significant direct competitors in the United States, the Justice Department said in a statement.
Together they account for 66 percent of the U.S. market for the sale of GP HSMs, it said.
Thales, Europe's largest defense electronics group whose largest shareholder is the French state, announced the $5.4 billion deal in December 2017. The company is seeking to boost its presence in the booming security services market, which includes encryption and biometric passports.
"The proposed divestiture will fully resolve all competition concerns," the Justice Department said.
In December 2018, Thales received EU antitrust approval for its bid for Gemalto in return for selling its GP HSM business nShield.
(Reporting by Eric Beech; Editing by Mohammad Zargham and Peter Cooney)