Hewlett-Packard Enterprise agreed to sell its software business to Micro Focus in a $8.8 billion deal that shrinks the Silicon Valley pioneer again while catapulting the little-known British firm into the top tier of European tech companies.
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Revenues in the newly-formed company stand at $4.5 billion (£3.4 billion), according to the official press release announcing the deal, meaning it has a higher turnover than United Kingdom tech giants like Newcastle software firm Sage (£1.4 billion, 2015) and recently acquired chip designer ARM (£968 million, 2015).
One of Britain’s biggest independent technology companies is to unveil a multi-billion pound deal to buy a chunk of Hewlett Packard’s software business in a move that will mark a rare exception to the usual flow of transatlantic takeovers.
The company expects full-year earnings in the range of $1.90 to $1.95 per share.
Hewlett Packard Enterprise (HPE) narrowed its focus even further yesterday, announcing during its Q3 earnings call that it will be selling off its Software Business Segment to United Kingdom business Micro Focus.
It also means that Micro Focus will be saddled with HPE’s Autonomy Corp software assets.
However, Whitman was quick to maintain that even with the spinoff, HPE isn’t getting out of the software business, and that the company would “double down” on its remaining software offerings, especially those for cloud-based technologies. “They are just not core to what we are doing”. The combined firm will be led by Kevin Loosemore, executive chairman of Micro Focus.
Among the terms of the deal are a $2.5 billion cash payment to HPE and 50.1 percent ownership of the new combined company by HPE shareholders.
Since 2011, Micros Focus has produced average annual shareholder returns of 39%, a performance which has bolstered investors’ favourable view of the company’s management team.
As part of the spin-merge transaction, Micro Focus and HPE also announced plans for a commercial partnership naming SUSE, a Micro Focus subsidiary, as HPE’s preferred Linux partner.
Separately, HPE reported third-quarter revenues of $12.2 billion and net income of $2.3 billion, or $1.32 per share, compared with year-ago revenues of $13.1 billion and net income of $200 million, or $0.13 per share.
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HPE has four divisions – Enterprise Group, which works in servers, storage, networking, consulting and support; Services; Software; and Financial Services.
