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Micro Focus to acquire HPE's software assets - including Autonomy - in $8.8bn 'spin-merge' deal

HPE slims down (again) in deal that will see Micro Focus acquire Autonomy's IDOL software

Micro Focus, the 40-year-old software tools vendor that this week joined the FTSE-100 following ARM's takeover by Softbank, is to acquire the non-core software assets of Hewlett Packard Enterprise (HPE) in a $8.8bn ‘spin-merge' deal that will see HPE emerge with a 50.1 per cent stake in ‘new' Micro Focus.

The software assets include IDOL, which HPE picked up with its disastrous acquisition of Autonomy for $10.3bn in October 2011 - a deal that current HPE CEO Meg Whitman had approved. In addition, Micro Focus will pick up ALM and AppPulse for application delivery management, Vertica and HPE Haven OnDemand, and a slew of security tools including ArcSight (which HPE only acquired six years ago) and Fortify.

The acquired assets will slot into Micro Focus's portfolio of Cobol tools development - a heritage that goes back to the founding of the company in 1976 - identity-based access governance, application development and testing, and IT operations management. There's relatively little overlap between the HPE software assets that Micro Focus is acquiring and Micro Focus's current software line-up.

HPE CEO Whitman claimed that the combination would "create one of the world's largest pure-play software companies".

She continued: "Micro Focus' approach to managing both growing and mature software assets will ensure higher levels of investment in growth areas like big data analytics and security, while maintaining a stable platform for mission-critical software products that customers rely on.

"Because of this, I believe that the software assets that will be a part of the combined company will bring better value to our customers, employees and shareholders as part of a more focused software company."

The deal is structured so that HPE shareholders, rather than HPE directly, will inherit the 50.1 per cent stake in the newly merged software company in the form of American Depositary Shares. This share stake is valued at $6.3bn, based on the value of Micro Focus shares on 5 September, while HPE will also receive a cash payment of $2.5bn from Micro Focus prior to completion of the merger.

HPE will also nominate 50 per cent of the independent directors to the company's board, giving HPE a strong influence over the strategic direction of Micro Focus.

Slimmed down HPE, meanwhile, which for its fiscal year to the end of October 2015 less than one year ago posted revenues of $103.4bn, will now have approximately $28bn in annual revenues, but focused on high-end servers and systems, services and software assets around cloud and software-defined tools.

Whitman claims that the divestitures will make HPE more coherent, easier to manage and, above all, more profitable.

Micro Focus to acquire HPE's software assets - including Autonomy - in $8.8bn 'spin-merge' deal

HPE slims down (again) in deal that will see Micro Focus acquire Autonomy's IDOL software

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