Shares in Micro Focus International (LON:MCRO) have soared more than 17 percent in London this morning, after the newest addition to the FTSE 100 index unveiled that it had inked a $8.8 billion (£6.6 billion) deal with Hewlett Packard Enterprises which is set to create one of the largest software companies in Britain by revenue. Micro Focus joined Britain’s premier index this week after shares in chip designer ARM Holdings were cancelled from trading in London following its takeover by Japan’s SoftBank.
As of 10:14 BST, Micro Focus’ share price had added 17.63 percent to 2,299.64p, making the company the biggest blue-chip riser in percentage terms in today’s session. The group’s shares have soared by more than 88 percent over the past year, and are up by some 44 percent in the year-to-date.
Micro Focus announced in a statement this morning that it had reached a deal with Hewlett Packard Enterprises which will see the UK group acquire HPE’s software business segment by merging with a wholly-owned HPE subsidiary. The FTSE 100 group noted that the transaction value was $8.8 billion.
“Today’s announcement marks another significant milestone for Micro Focus and is wholly consistent with the long-term business strategy we have been pursuing to be the most disciplined global provider of infrastructure software,” Micro Focus’ executive chairman Kevin Loosemore commented in the statement, adding that the merger would create “one of the world’s largest infrastructure software companies”. The two groups will have combined annual revenues of $4.5 billion and EBITDA of $1.35 billion.
While HPE will appoint one executive director who will be on the Micro Focus board for two years and a number of non-executives, the London-listed group dismissed the notion that HPE would be the driving force in the merged group.
“We have total control of what is happening,” Loosemore said, as quoted by the Financial Times. “We are effectively buying their business […] HP will have no share of this business once the deal is done.”
The Guardian quoted Neil Wilson, market analyst at ETX Capital, as commenting that 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 pointed out.