What’s Going On Here?OpenText – one of Canada’s biggest software makers – agreed to buy UK rival Micro Focus late last week, in an eye-watering deal worth around $6 billion. What Does This Mean?OpenText has made a series of acquisitions in the last few years as part of a broader growth strategy, and Micro Focus – which provides the majority of Fortune 500 companies with everything from cybersecurity to IT management software – has been on its radar for a while. And now was as good a time as any to pounce: Micro Focus’s stock has dropped 39% in the last year, down to a combination of its lackluster growth and a dip in the tech sector.
OpenText, then, agreed to buy the company for around £5 ($6) a share – almost twice what they were worth before the deal was announced. It’s confident that it can accelerate the company’s transition to cloud-based operations, and use its scale to grow into an even bigger fish in the business information management space. The deal will make OpenText one of the world’s biggest software and cloud businesses, and it’s expecting the deal to save it around $400 million in costs too. Why Should I Care?For markets: Investors are back on board.
The deal could still be blocked by Micro Focus’s shareholders, but it’s unlikely: they’ve watched its revenue fall every year since 2018, which means this is probably the best bet for both the company itself and for their returns. That might be why investors sent it up 93% after the news – Micro Focus’s biggest intraday jump on record.
Zooming out: Ooh la la.
UK tech groups seem to be in high demand at the moment: French conglomerate Schneider Electric said last week it’s thinking about buying up the rest of industrial software developer Aveva. If it goes ahead, it’ll be one of the biggest French-British deals in the last few months, second only to satellite operator Eutelsat’s merger with OneWeb. | 