Enterprise software maker OpenText to acquire Micro Focus for $6 billion

Enterprise software provider OpenText Corp. will acquire Micro Focus International plc, another major player in the enterprise software market, for $6 billion.

Businesses announcement acquisition on Thursday. The $6 billion offered by OpenText values ​​UK-based Micro Focus at 5.32 pounds per share, a 98.7% premium to the company’s last closing share price. OpenText expects to close the transaction in the first quarter of 2023.

OpenText, based in Waterloo, Canada, provides software companies use to manage their business records. In the company, business documents are often scattered across a large number of internal systems, which can make it difficult for workers to find information. OpenText’s software makes it easy to find business records, while simplifying related tasks such as securing data.

Over the years, OpenText has expanded into many other segments of the enterprise software market. The company offers tools that organizations can use to analyze their data to gain valuable business insights, optimize ad campaigns, and automate manual tasks.

Micro Focus also maintains a presence in several market segments. The company sells software development tools that organizations use for tasks such as moving mainframe applications to the cloud and detecting insecure code. As part of its product portfolio, Micro Focus also offers cloud and on-premises infrastructure management tools.

The acquisition of Micro Focus will allow OpenText to be present in several segments of the enterprise technology market where it is not currently an established player. In addition, the agreement aims to expand OpenText’s core product portfolio for business records management. Micro Focus offers a set of applications that businesses can use to back up their business records, organize them, and ensure data is managed in compliance with regulations.

“Once the acquisition is complete, OpenText will be one of the largest software and cloud companies in the world with a strong customer base, global scale and comprehensive go-to-market,” said Mark Barrenechea, chief executive and Chief Technology Officer of OpenText. “OpenText and Micro Focus customers will benefit from a partner who can help them even more effectively accelerate their digital transformation efforts by unlocking the full value of their information assets and core systems.”

The acquisition is structured as an all-cash transaction. OpenText will fund the deal with $1.3 billion in cash, $4.6 billion in new debt and $600 million drawn from an existing revolving credit facility.

OpenText expects the acquisition to be immediately accretive to its adjusted EBITDA, or earnings before interest, taxes, depreciation and amortization. In the longer term, the company expects the acquisition of Micro Focus to facilitate annual cost savings of $400 million. OpenText further projects that joining forces will expand its total addressable market to $170 billion.

OpenText generated Adjusted EBITDA of $314 million on revenue of $902 million last quarter. Micro Focus, in turn, reported adjusted EBITDA of $449 million and revenue of $1.3 billion for the first half of its fiscal 2022.

“With this scale, we believe we have significant growth opportunities and the ability to create top-quartile adjusted EBITDA and free cash flow,” Barrenechea said.

The purchase of Micro Focus is the latest in a series of significant acquisitions OpenText has made in recent years. Previously, the company purchased publicly traded cybersecurity provider Zix Corp. last December in a deal valued at $860 million. OpenText previously spent $1.42 billion in 2019 to acquire Carbonite Inc., a Boston-based data protection software provider.

Image: OpenText

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