OpenText pushes acquisitive approach to growth with $6 billion Micro Focus deal

You see a lot of acquisitions go down when you're covering enterprise software. Many are mostly pedestrian, even if they involve large sums of money, but today's news that OpenText is buying Micro Focus for a total value of $6 billion seems a little different.

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Micro Focus, a British company, built much of its business by buying legacy software companies such as Borland, Novell and Cobol-IT. Its most high-profile deal was an $8.8 billion deal in 2016 to partner with HPE on part of its enterprise software portfolio.

Aside from some of the pieces in the HPE portfolio, like the infamous Autonomy agreement, most of the Micro Focus catalog doesn't align directly with OpenText's content management roots. This is because it seems important to expand rather than having a direct synergy with the acquirer.

"Like a shark that must keep swimming, OpenText must keep acquiring, as their legacy platforms are all in long, slow decline as licensees eventually retire for more modern platforms ." Tony Byrne, Founder, Real Story Group

In terms of the terms of the acquisition, the total enterprise value of the deal is approximately $6 billion (£5.1 billion), with a net worth of approximately $2 $.1 billion (£1.8 billion). The companies have calculated that the price per share offered, approximately 532 pence, represents a 98.3% premium to Micro Focus's closing price before the deal was announced.

Micro Focus, which is neither micro nor focused, has had a tough time in recent years, with revenue declining every year since 2018. Additionally, its share price has fallen more than 44% this year. year and over 89% the previous year. five years. As of this morning, it was trading at just $3.15 per share in US markets, making it vulnerable to a takeover.

The company dates back to 1976 and over the years changed its name, changed it again and acquired a large number of companies. Since 1998, he's made a total of 15 trades, according to Crunchbase, many of them of the legacy variety. The most recent transaction was ATAR Labs, a security company acquired in 2020 for $15 million.

The deal seems odd because it combines two big-money companies that don't have a ton of crossover. Are the potential financial gains worth it? OpenText thinks so.