(HPE) announced Wednesday that it will spin off its software assets division and merge it with the United Kingdom -based Micro Focus International Plc in a deal worth $8.8 billion.
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The move is part of HPE Chief Executive Meg Whitman’s plans to shift HPE’s strategy to a few key areas such as networking, storage and technology services since the company separated previous year from computer and printer maker HP Inc.
In a statement, Kevin Loosemore, executive chairman of Micro Focus, said, “The combination of Micro Focus with HPE Software will give customers more choice as they seek to maximize the value of existing IT assets, leveraging their business logic and data along with next-generation technologies to innovate in new ways with the lowest possible risk”.
In return, HPE would get US$2.5bil in cash and its shareholders would own 50.1% of the merged company, it said.
The deal will enable HPE to unload its Autonomy and Vertica businesses.
A lot of the assets HPE is selling were gained from its deal in 2011 to acquire British software firm Autonomy, which turned sour for HPE, or HP at the time, and contributed in it writing off $8.8 billion.
Micro Focus, based in Newbury, England, said the surviving company would have annual revenue of about US$4.5 billion.
“I want to be crystal clear – HPE is not getting out of software”. The combined company will have strong recurring revenue streams, global reach and be well diversified across product lines – spanning IT operations, security, information management, big data analytics, cloud, open source and development.
“With today’s announcement, we are taking another important step in achieving the vision of creating a faster-growing, higher-margin, stronger cash flow company well positioned for our customers and for the future”, said Meg Whitman, President and Chief Executive Officer of HPE. HP’s $11 billion purchase of Autonomy was supposed to form the central part of the US group’s move into software. This equity stake in Micro Focus is valued at approximately $6.3 billion based on the closing price of Micro Focus shares as of market close on September 5, 2016.
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The deal with Micro Focus still requires antitrust approval. (HPQ). HPE in May announced plans to spin off and merge its enterprise-services division with Computer Sciences Corp.
