Micro Focus shares surge after takeover bid from Canadian rival

Micro Focus International’s shares have almost doubled after it became the latest UK tech company to be snapped up by an overseas group.

Canada’s OpenText agreed to buy the UK software developer in an all-cash deal that values it at £5.1bn. Micro Focus shares were up 93.5 per cent in London trading on Friday to 518p.

OpenText’s 532p-per-share offer is roughly twice Micro Focus’s closing price on Thursday before news of the takeover came to light.

The deal is the latest in a flurry of recent interest in UK tech groups. It comes just days after French conglomerate Schneider Electric said it was exploring a full takeover of Cambridge-based software developer Aveva.

Last week, US private equity group Thoma Bravo said it was considering a bid to privatise Darktrace, a Cambridge-based cyber security company, while cyber security group Avast is in the process of exiting the FTSE 250 after agreeing to merge with its US rival NortonLifeLock for £7.1bn.

If the deals go through they will reduce the number of London-listed tech companies, leaving Auto Trader and Sage among those remaining in the FTSE 100 under the software and IT services sector.

Line chart of Price per share (p) showing Micro Focus jumps on OpenText takeover bid

OpenText, one of Canada’s largest software makers, said it expected cost savings of $400mn from the deal. The company makes software to power internal company intranets, emails and manage documents.

Newbury-based Micro Focus develops enterprise software for businesses, focusing on cyber security, IT management, communications and messaging. Its software is used by retailers, banks and airlines.

“Micro Focus brings meaningful revenue and operating scale to OpenText, with a combined total addressable market of $170bn,” said the Canadian group’s chief executive Mark Barrenechea. “With this scale, we believe we have significant growth opportunities.”

Micro Focus has more than 11,000 global staff, 8 per cent of whom are based in the UK.

“This approach was not sought by us but it is a highly complementary combination,” said Micro Focus chief executive Stephen Murdoch, adding that there is little product overlap between the two companies.

The move comes as the strength of the dollar vs the pound “makes for competitive pricing of UK assets”, said Jonathan Simnett, director at Hampleton Partners, an M&A and corporate finance consultancy for technology companies.

“We are in the consolidation part of the IT cycle and M&A and exits have become more attractive as investment conditions tighten,” he added.

Gerard Grech, chief executive of Tech Nation, a government-backed network for UK tech entrepreneurs, said the UK continued to be a “magnet for investors and a natural destination and home for US investors”.

“This is all part of a larger journey whereby UK tech becomes a growing, circular innovator and job creator. The ripple effect will be more capital invested in the next generation of UK-based tech start-ups and scale-ups by new exited angel investors.”

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