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Micro Focus to sell SUSE Linux to private equity firm for $2.5bn

Micro Focus takes first concrete steps to tidy up following 2017's 'spin merge' with HPE Software

Micro Focus has offloaded its SUSE Linux business to a Swedish private equity firm for $2.535 billion in cash - less than four years after scooping it up with its $1.2 billion merger with Attachmate.

TechMarketView suggested that the divestiture was relatively straightforward for Micro Focus as SUSE had been run as a separate entity for years and, hence, didn't require any restructuring to sell-on.

Unlike Micro Focus as a whole, SUSE has been growing strongly over the past year, with revenue growth at 20 per cent to £303 million in the year to the end of April 2017, and $164 million in the six months to the end of October 2017. Operating profits have also grown strongly, according to TechMarketView.

It added that the sale is part of the fall-out from integration issues following Micro Focus's ambitious ‘spin merge' with HPE Software last year. CEO Chris Hsu resigned in April after warning of a deeper-than-expected decline in revenues of between six and nine per cent in the current financial year.

According to TechMarketView, there were three offers on the table for the SUSE business, and the sale will provide funds to reduce debt and improve shareholder returns.

TechMarketView's Angela Eager said: "There has been pressure for Micro Focus to divest from external fund managers and when hedge fund Elliott Management took a stake in Micro Focus earlier this year no doubt the pressure cranked up.

"Despite SUSE's separate operating status it is expected to take six-to-nine months to carve out the business so the transaction is likely to close in the first calendar quarter of 2019. This will be another major task to deal with when the company is still grappling with the HPE Software integration.

"Even without SUSE, Micro Focus still has a broad portfolio with several overlaps."

The private equity firm, EQT Partners, set-up a special purpose vehicle, called Blitz 18-679 GmbH, which itself is a wholly owned subsidiary of EQTVIII SCSp, to acquire SUSE.

Micro Focus International was founded in 1976 by Brian Reynolds to create Cobol software tools for mainframes. Via a series of mergers and acquisitions, it is today one of the world's largest companies, albeit with a disparate range of software packages and tools.

In 2009, Micro Focus acquired Borland and its 2014 Attachmate deal also brought in Novell, as well as SUSE. But Micro Focus's biggest deal was its $8.8 billion ‘spin merge' with HPE Software, completed in 2017. This encompassed all the various software acquisitions Hewlett-Packard had made over a number of decades, including ArcSight, Autonomy, Mercury Interactive and Peregrine Systems.

The HPE merger tripled the company's size overnight, creating an integration headache that will no doubt take several years to overcome. Micro Focus floated on the London Stock Exchange in 1983 and its shares are now also traded on the New York Stock Exchange.

Micro Focus to sell SUSE Linux to private equity firm for $2.5bn

Micro Focus takes first concrete steps to tidy up following 2017's 'spin merge' with HPE Software

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