Micro Focus to acquire US’ The Attachmate Group for $1.2 bn

Infrastructure software firm Micro Focus International Plc, has struck a deal to acquire US-based business-software provider The Attachmate Group Inc from a group of private equity firms, that would approximately triple its business, Bloomberg reported.

Micro Focus shares shot as 11 per cent in London on news of the deal.

In a reverse merger, Micro Focus will acquire the entire issued share capital of the Attachmate Group, in exchange for the issue of approximately 86.60 million ordinary shares to Attachmate's parent company, Wizard Parent, LLC. for Wizard's owners - Francisco Partners LP, Golden Gate Capital, Elliott Management Corp and Thoma Bravo LLC, will come to own about 40 per cent in the enlarged company.

Based on Micro Focus' closing share price of 842.5p as on 12 September 2014, the value of the shares to be allotted to Wizard is approximately £729.6  million ($1,184.0 million), which together with Attachmate's net debt of $1,165.8 million as on 31 July 2014 amounts to an enterprise value of the transaction of $2,349.8 million before costs. In the year ended 31 March 2014 Attachmate generated revenues of $956.8 million and Underlying Adjusted EBITDA of $312.8 million.

Micro Focus is a supplier of software and services for the development and deployment of business applications, with 91 of the Fortune Global 100 companies as its customers, according to its website.

The Houston-based Attachmate's offerings include distributing the Linux operating system, device management and file hosting. According to Micro Focus, it planned to return about £83.9 million to shareholders, equivalent to 60 pence per share.

Micro Focus said in a statement the deal combines its strong product franchises with the Attachmate Group's product portfolios serving adjacent and complementary market segments. The Enlarged Group would benefit from a top three global market position in a number of key segments, including off-mainframe COBOL, mainframe modernisation, host connectivity and Linux operating systems.

Commenting on the proposed merger, Kevin Loosemore, executive chairman, Micro Focus, said, "There is compelling rationale behind this Merger. Both companies are well established enterprise software vendors operating at a global scale with a presence in all significant international markets.

"Both hold a portfolio of software solutions which address specific aspects of the infrastructure software requirements of a substantial installed base of large enterprise customers, with no material customer concentration or direct overlap; and both Attachmate and Micro Focus' respective product groups are predominantly mature solution sets which are embedded within the IT infrastructures of large corporate customers."

Loosemore added, "The board believes that the merger will deliver a more attractive and expanded product offer to customers. It will provide choices as organisations address increasingly complex IT challenges and strive to preserve business logic and data as they bridge from the old and the new to exploit new technology trends, such as the cloud or mobility.

"The board believes that the proposed merger presents a rare opportunity to achieve a significant increase in the scale and breadth of Micro Focus, with the potential to deliver shareholder returns that are superior to those likely to be achieved on an organic basis."

Loosemore also said the company would not look for other acquisitions for at least 24 months.

Micro Focus said today its shareholders would receive about 40 per cent of the equity in the new group, which, on the basis of Micro Focus' closing share price on 12 September valued the UK company at about £729.6 million, or $1.18 billion.