Banking Recap

OPEN TEXT CORP Announces Acquisition for $6.00B

OpenText Corporation (NASDAQ: OTEX, TSX: OTEX), a Canadian information management software company, announced a definitive agreement to acquire the entire issued and to be issued share capital of Micro Focus International plc (LSE: MCRO; NYSE ADS: MFGP), a UK-listed enterprise software company, in an all-cash recommended offer at 532 pence per share. The transaction implies an enterprise value of approximately 6.0 billion dollars on a fully diluted basis, with a total purchase price described as 2.2 times Micro Focus' pro forma trailing twelve month revenue and 6.3 times its pro forma adjusted EBITDA. The deal creates one of the largest software and cloud businesses in the sector, expanding OpenText's addressable information management market to an estimated 170 billion dollars.

Aug 25, 2022·SEC EDGAR (8-K)·pending regulatory·take-private of UK target via scheme of arrangement

Deal value

This record is sourced from an 8-K exhibit (Exhibit 99.1) filed by OpenText Corporation with the SEC on August 25, 2022, containing the companies' joint press release announcing the transaction. At the time of this filing the deal had just been announced and was proceeding toward implementation by means of a court-sanctioned scheme of arrangement under the UK Companies Act 2006, requiring approval from Micro Focus shareholders at a Court Meeting and General Meeting as well as sanction by the UK court.

Barclays Bank PLC served as the sole financial advisor to OpenText on the acquisition, a role stated plainly in the release: "Barclays Bank PLC is serving as sole financial advisor to OpenText." No financial advisor to Micro Focus is named in this particular exhibit. Separately, in connection with financing the acquisition, Barclays Bank PLC, BMO Capital Markets Corp., Royal Bank of Canada and Citigroup Global Markets Inc. acted as lead arrangers, and Barclays Bank PLC also served as administrative agent under both a new first lien term loan credit agreement and a bridge loan agreement entered into concurrently with the announcement.

On the legal side, Allen & Overy LLP and Cleary Gottlieb Steen & Hamilton LLP acted as legal advisors to OpenText. No legal advisor to Micro Focus is disclosed in this exhibit.

The all-cash acquisition was structured to be funded without any new OpenText equity: approximately 4.6 billion dollars in new debt (via the term loan facility), 1.3 billion dollars in cash on hand, and a 600 million dollar draw on OpenText's existing revolving credit facility. The term loan facility was sized at 2.585 billion dollars and was designated solely to finance the acquisition, while the bridge loan facility of up to 2.0 billion dollars, together with cash on hand and revolver borrowings, was earmarked to repay Micro Focus' existing debt. OpenText stated it intended to reduce the bridge commitments through debt capital markets issuances before or after closing. Expected cost synergies were pegged at 400 million dollars, including a previously announced 300 million dollar Micro Focus cost-savings program plus 100 million dollars of additional synergies, with OpenText targeting integration onto its operating model within six quarters of closing.

Not disclosed in this exhibit: the identity of any financial or legal advisor to Micro Focus, the specific terms of the debt capital markets issuances OpenText intended to pursue to reduce the bridge facility, and the actual closing date (only the expectation of closing in the first quarter of calendar 2023 is given). No per-share price in U.S. dollars is stated; only the 532 pence figure and the approximate 6.0 billion dollar enterprise value are disclosed.