After listing on the London Stock Exchange in 2005, the company grew steadily, but it wasn’t until executive chairman Loosemore took the helm in 2011 that it launched a more thorough policy of acquiring companies on a downturn.
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The deal was announced with HPE’s latest quarterly earnings.
Micro Focus, with a market capitalization of 4.45 billion pounds ($6 billion) before the deal, has been snapping up software companies.
“Moody’s views the spin-off of HPE’s software business as modestly credit negative because HPE will lose the benefit of diversification as well as the modest free cash flow that the software business provides without a commensurate reduction in debt”, said lead analyst Richard Lane.
Micro Focus will pay Dollars 2.5 billion in cash to HPE. HPE will be merging Application Delivery Management, Big Data, Enterprise Security, Information Management & Governance and IT Operations Management businesses with Micro Focus in order to create one of the world’s biggest pure-play software companies. “That said, we believe the value extracted from the spin-merger of the software business with Micro Focus adds at least $2 in value for shareholders to our previous $22 price target (now $24) and on that basis warrants a reiteration of our buy rating”.
Hewlett-Packard Co. past year split into two companies, with Hewlett Packard Enterprise selling commercial tech products and services, while HP Inc. focuses on personal computers and printers. Earlier this year, it acquired U.S company Serena Software for $540 million.
HPE’s software revenue growth has been challenged by a market shift toward cloud subscription services. The entire transaction is expected to be tax-free for HP. The assets acquired from HPE include former United Kingdom tech firm Autonomy, which was bought out by the USA company in an ill-fated 2011 deal.
Micro Focus expects to improve the margin on Hewlett Packard Enterprise’s software assets by about 20 percentage points by the end of the third full financial year following the close of the transaction, the companies said. The company partnered with CSC, a former rival in the industry, for the deal.
The ownership of the company is also one which is murky, with HPE receiving a 50.1% stake in the merged company in return for its extensive software portfolio.
With the HPE – Micro Focus tie-up, Autonomy swims back into the British land.
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Micro Focus and Hewlett Packard Enterprise have also announced their plans to enter into a commercial partnership with SUSE, naming the German-based open-source software company as Hewlett Packard Enterprise’s preferred Linux partner.
