By Sammie jones-
One of Britain’s largest technology firms has announced a multi billion-pound deal to buy part of Hewlett Packard’s business in what will create one of the world’s leading software companies.
Hewlett Packard Enterprise (HPE) is set to branch off in an amalgamation of its non-core software assets with Berkshire-based Micro Focus International in a deal worth $8.8bn (£6.6bn).
Shares in Micro Focus surged 21% on Thursday morning to a record high of £23.87, making it the biggest riser on the FTSE 100.
Micro Focus have expressed the deal as a rare opportunity to significantly increase the scale of the company, invariably taking sales to a higher annaul revenue of $4,5bn
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The enormity of the deal makes it one of the largest takeover by a British company in recent years, and the executive chairman of Micro Focus, Kevin Loosemore, said the tie-up marked a “signifcant milestone”.
“The merger will create one of the world’s largest infrastructure software companies with leading positions across a number of key products. It represents a compelling opportunity to create significant value for both companies’ shareholders,” he said.
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According to the companies, the deal would generate better returns for shareholders and higher earnings per share by the end of the first full financial year.
Neil Wilson, market analyst at ETX Capital, told the Guardian: “It’s a big scalp for the FTSE 100 group, which has been on a buying spree of late, and marks the end of the Autonomy saga for HPE.
“HPE will no doubt be glad to see the back of Autonomy, which it acquired in 2011 in one of the worst deals in recent corporate history.”
Wilson said the deal was a confident move by Micro Focus, swimming against the tide of UK companies being snapped up by overseas buyers. “After Arm Holdings was sold to SoftBank, it’s a sign that the UK tech sector is still capable of making deals in the other direction,” he said.
“[The HPE deal] would be the biggest acquisition by a British company of a foreign tech firm, and comes in the face of a massive drop in the value of the pound that has made UK firms the target of overseas bidders.”
The terms of the deal are profitable for all parties, to different degrees. Micro Focus will pay $2.5bn in cash to HPE, while HPE shareholders will own 50.1% of the combined company, under the business name of Micro Focus, under the auspices of its executives. HP said it would pay $700m in one-time costs related to the separation of the assets.
Founded in 1976, Micro Focus employs more than 4,500 people in more than 80 global locations, with about 20,000 customers worldwide. HPE has more than 50,000 customers.
Meg Whitman, HPE chief executive, said: “With today’s announcement we are taking another important step in achieving the vision of creating a faster-growing, higher-margin, stronger cash-flow company well positioned for our customers and for the future.
“We believe the software assets that will be a part of this combination will bring better value to both our customers and shareholders as part of a more focused software company committed to developing these businesses on a standalone basis.”