Nasdaq-listed surveillance and business intelligence company Verint Systems Inc. is negotiating a $1 billion merger with Israeli cyber surveillance company NSO Group for in a cash and stock deal, according to two persons familiar with the matter.

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The deal is not yet finalized and may fall through, one of these people said.

the Wall Street Journal first reported the negotiations.

Verint was approached for a comment Monday but has yet to respond.

NSO Group's co-founder Omri Lavie. Photo: Amit Sha'al

Verint develops and sells customer engagement systems and surveillance products to governments, law enforcement agencies, secure facilities, banks, and media companies. Founded in 1994 and headquartered in Melville, New York, Verint employs a team of 5,100 people, 1,100 in its offices in Israel.

In March, Calcalist reported Verint was mulling over a separate listing for its security intelligence division, citing one person familiar with the matter who spoke on condition of anonymity. A month earlier, in February, Calcalist reported that Verint was looking to sell the struggling division, citing anonymous sources. Verint’s stock, which peaked in April 2015 at $65, had dropped 41% at that time, to $38. Verint’s stock now trades at $44.05.

Founded in 2010, NSO develops and sells cyber attack tools that can be used to gather intelligence from mobile phones and other devices. NSO counts governments and law enforcement agencies among its clients, and has previously been embroiled in scandals involving alleged human rights violations.

If the merger deal goes through, NSO will operate as a stand-alone business unit, that will be added to Verint’s existing divisions, one of the persons interviewed by Calcalist Monday said speaking on conditions of anonymity. The company’s top executives are expected to continue leading the company, that person said. NSO employs around 600 people, most of them in its headquarters in Herzliya, north of Tel Aviv.

According to the Wall Street Journal, Verint has offered to pay NSO’s controlling shareholder, San Francisco-based private-equity firm Francisco Partners, with Verint stock, making Francisco Partners Verint’s largest shareholder, if the deal goes through.

In 2016, University of Toronto researchers discovered that software by NSO was used by the United Arab Emirates to spy on a human rights activist. In June 2017, the same software popped up again in a covert Mexican government operation targeting activists, journalists, and political opposition in the country.

In August 2017, Calcalist reported that private equity firm Blackstone Group L.P backed out of a deal to buy a 40% stake in NSO, citing anonymous sources. The cancellation came after an online petition was circulated, calling Blackstone to call off the acquisition.