UK

Micro Focus shares surge 90% as London-listed software giant falls prey to £5.1bn takeover by Canadian rival 

Opentext had agreed to pay 532p per share in an all-cash deal

That represents a near-90% premium to yesterday's closing price

Micro Focus shares jumped 93% on Friday to 516p

By CAMILLA CANOCCHI FOR THISISMONEY.CO.UK

PUBLISHED 26 August 2022 


Micro Focus, one of the few remaining London-listed tech companies, has fallen prey to a £5.1billion takeover from larger Canadian rival Opentext.

Shares in the Newbury-based software company shot up more than 90 per cent this morning after the companies said Opentext had agreed to pay 532p per share in an all-cash deal.

It represents a near-90 per cent premium to Micro Focus' Thursday closing price. Micro Focus shares rose 92.6 per cent to 515.80p in morning trade on Friday.

The takeover of Micro Focus further dilutes the number of tech firms listed in London

Micro Focus chairman, Greg Lock, said: 'I am pleased to be recommending OpenText's offer to our shareholders.

'The premium offered demonstrates the significant progress we have made transforming the business.

'OpenText not only shares our values but will offer new opportunities for both our customers and employees.'.

The deal, which is expected to be completed in the first quarter of 2023, will have to approbed by regulators.

It will create 'one of the world's largest software and cloud businesses', Opentext's chief excutive, Mark Barrenechea, said.

However, the firm also said the deal will result in 'moderate headcount reduction' across the merged group.

'At this stage, no decisions have been made in relation to the extent to which headcount reductions in any geographies or areas of the business might contribute towards the targeted cost savings', it added.



Micro Focus shares remain well below their peaks in 2017 and 2019

Analysts said the deal further diluted the number of tech firms listed in London.

'This is a loss for London's listed technology market as one of its key players, Micro Focus prepares to shift overseas under Canadian ownership,' said Victoria Scholar, head of investments at interactive investor.

'However it is most certainly a win for the software company itself, which is subject to an unrefusable offer at a drastic premium to its previous share price.'
This is a loss for London's listed technology market as one of its key players

Since going public in 2005, Micro Focus enjoyed a stellar rise, with the stock soaring more than 1,800 per cent to reach a peak around the end of 2017.

However in 2018, the departure of Micro Focus' chief executive at the time, combined with disappointing sales and a botched merger with HP's software division, saw its share price plunge.

The company dropped out of the FTSE 100 the following year, and is now part of the FTSE 250.

The gloomy outlook for the UK economy, the weakness of sterling and the fall in valuations of many London-listed companies have left them vulnerable to overseas bids.

Another London-listed tech company, Darktrace, revealed earlier this month that it was in early-stage takeover talks with a US private equity firm.