Krystal Hu and Eva Mathews.
Micro Focus shares jumped more than 90% on Friday after Canadian software giant OpenText agreed to purchase the business software manufacturer in an all-cash transaction for $6 billion, including debt.
OpenText said on Thursday that it will pay 532 pence ($6.30) in cash for each Micro Focus share, a 98.7% premium over Micro Focus’s closing price on Thursday, giving the company a market valuation of almost $2 billion.
In early trading, Micro Focus’ shares rocketed to a more than one-year high of 518 pence.
According to a joint statement issued on Thursday, the UK business believes the terms of the sale are “fair and reasonable” and would suggest that shareholders vote in favor of the purchase.
According to its most recent financial report, Micro Focus, situated in Newbury, Berkshire, has $4.4 billion in debt on its balance sheet.
OpenText will fund the transaction with $4.6 billion in new debt, $1.3 billion in cash, and $600 million borrowed from its current revolving credit facility.
During a conference call with investors, OpenText CEO Mark Barrenechea stated that the firm can stabilize Micro Focus’s business and speed its cloud transition.
Micro Focus assists customers with the maintenance and integration of legacy IT systems. A company that has expanded via the acquisition of legacy technology such as mainframe computer software used by banks, merchants, and airlines.
OpenText, one of Canada’s major software companies expects to save $400 million when the purchase is completed. The transaction is subject to regulatory approval.
In after-hours trading on Thursday, the company’s US-listed shares were down 4.8%.
Barclays (Lon: BARC) advised OpenText on the transaction, which is slated to conclude in the first quarter of 2023.
Goldman Sachs (GS) and Numis advised Micro Focus. 1 dollar equals 0.8448 pounds