Enterprise software provider OpenText Corp. will acquire Micro Focus International plc, another major player in the enterprise software market, for $6 billion.

The companies announced the acquisition on Thursday. The $6 billion that OpenText is offering values U.K.-based Micro Focus at 5.32 pounds per share, a 98.7% premium to the most recent closing price of the company’s stock. OpenText expects to close the transaction in the first quarter of 2023.

Waterloo, Canada-based OpenText provides software that companies use to manage their business records. In the enterprise, business records are often scattered across a large number of internal systems, which can make it difficult for workers to find information. OpenText’s software makes it easier to find business records, while also simplifying related tasks such as securing data.

OpenText has over the years expanded into numerous other parts of the enterprise software market. The company offers tools that organizations can use to analyze their data for useful business insights, optimize ad campaigns and automate manual tasks.

Micro Focus likewise maintains a presence in multiple market segments. The company sells software development tools that organizations use for tasks such as moving mainframe applications to the cloud and detecting insecure code. As part of its product portfolio, Micro Focus also offers tools for managing cloud and on-premises infrastructure.

The acquisition of Micro Focus will enable OpenText to gain a presence in several parts of the enterprise technology market where it currently isn’t an established player. Additionally, the deal is set to expand OpenText’s core portfolio of products for managing business records. Micro Focus offers a set of applications that companies can use to back up their business records, organize them and ensure data is managed in accordance with regulations.

“Upon completion of the acquisition, OpenText will be one of the world’s largest software and cloud businesses with a tremendous marquee customer base, global scale and comprehensive go-to-market,” said OpenText Chief Executive and Chief Technology Officer Mark Barrenechea. “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.”

The acquisition is structured as an all-cash transaction. OpenText will finance the deal with $1.3 billion in cash, $4.6 billion in new debt and $600 million drawn from an existing revolving credit facility.

OpenText expects the acquisition to be immediately accretive to its adjusted EBITDA, or earnings before interest, taxes, depreciation and amortization. In the longer term, the company anticipates that acquiring Micro Focus will facilitate annual cost savings of $400 million. OpenText further projects that joining forces will expand its total addressable market to $170 billion.

OpenText generated adjusted EBITDA of $314 million on $902 million in revenue last quarter. Micro Focus, in turn, reported adjusted EBITDA of $449 million and revenue of $1.3 billion for the first half of its 2022 fiscal year.

“With this scale, we believe we have significant growth opportunities and ability to create upper-quartile adjusted EBITDA and free cash flows,” Barrenechea said. 

The purchase of Micro Focus is the latest in a series of big-ticket acquisitions that OpenText has made over recent years. Previously, the company bought publicly traded cybersecurity provider Zix Corp. last December in a deal valued at $860 million. OpenText earlier spent $1.42 billion in 2019 to acquire Carbonite Inc., a Boston-based provider of data protection software. 

Image: OpenText