An investment firm plans to take SUSE SA private to advance the open-source software maker’s long-term growth strategy.

SUSE announced the plan on Thursday. The proposed deal values the company at about €2.6 billion, significantly higher than its market capitalization before the transaction’s announcement.

Germany-based SUSE develops a popular Linux distribution of the same name. Companies use the distribution to power cloud instances, industrial equipment and a variety of other systems. SUSE also sells a number of other products, including the Rancher container management platform and the NeuVector cybersecurity tool.

SUSE’s majority shareholder is a holding company called Marcel LUX III SARL that is incorporated in Luxembourg. Marcel owns a 78% stake in the software maker. The holding company, in turn, is owned by EQT, a Swedish investment firm that manages more than €200 billion worth of assets.

EQT is offering to buy SUSE stock from the software maker’s other investors at a price of €16 per share. That’s a 67% premium to SUSE’s last unaffected closing price on the Frankfurt Stock Exchange.

In its announcement of the acquisition, SUSE stressed that EQT “does not intend to pursue a squeeze-out.” A squeeze-out is a situation where an investor buys most of a company and forces the other shareholders to sell their stock. SUSE said that its current investors may retain their stakes after it moves off public markets.

As part of the transaction, SUSE will borrow up to €500 million and use the funds to issue a onetime dividend. The dividend is expected to range from €1.07 to €3.42 per share. According to SUSE, it will be paid out to investors regardless of whether they accept EQT’s buyout offer.

Most notably, the dividend will also be issued to Marcel, the holding company through which EQT owns a majority stake in SUSE. Marcel will use the windfall to finance the take-private transaction. It expects to close the deal in the fourth quarter.

SUSE’s move off the stock market comes a few months after a major leadership change at the company. The software maker in May appointed Dirk-Peter van Leeuwen, the former head of rival Red Hat’s North America business, as its chief executive. SUSE named Werner Knoblich, another Red Hat veteran, as its chief revenue officer two months later. 

SUSE disclosed sluggish sales growth in its most recent quarterly report. The company’s adjusted revenue increased by just 1% year-over-year, to $162 million, in the three months ended April 30. It posted 18% growth a year earlier.

Following the earnings report, van Leeuwen told investors the company plans to embark on a multiquarter effort to accelerate its growth. The initiative will focus on building closer ties with customers and increasing sales teams’ productivity. SUSE also plans to make changes to its organizational structure. 

Photo: SUSE