Shares of Micro Focus International plc (LON: MCRO) nearly doubled this morning after Open Text Corp (NASDAQ: OTEX) said it will buy the software and information technology company for $6.0 billion.
Micro Focus offered a 100% premium
Open Text is willing to pay 532 pence a share for the British multinational that represents about a 100% upside on its previous close. The transaction will close in the first quarter next year as long as it secures regulatory and shareholders’ approval.
The stock market news, however, wasn’t a boon for “OTEX” that slid nearly 15% on Friday. Still, its CEO Mark J. Barrenechea said in the press release:
Customers of OpenText and Micro Focus will benefit from a partner that can even more effectively help them accelerate their digital transformation efforts by unlocking the full value of their information assets and core systems.
What’s in it for Open Text Corp?
Open Text forecasts the proposed acquisition to result in $400 million of cost synergies and expects a significant boost to cloud revenue, cash flow, and adjusted EBITDA in fiscal 2024. Barrenechea added:
Micro Focus will benefit from the OpenText Business System to create stronger operations and significant cash flows, and Micro Focus customers will benefit from the OpenText Private and Public Clouds.
Upon completion, Open Text will also find a spot on the list of the world’s largest software and cloud companies with a total addressable market of about $170 billion.
It will use $1.30 billion it has in cash to fund the agreement and another $4.60 billion will come from new debt. Last year, the Canadian company also bought Zix Corporation (email encryption service) for roughly $860 million.
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