Micro Focus to merge with Attachmate Group in $2.4bn deal

UK software group Micro Focus International is to merge with The Attachmate Group in a $2.4bn deal which "presents a rare opportunity to achieve a significant increase in the scale and breadth" of the business.

The company also assured investors that its previously announced 60p-a-share (£84m) cash return will go ahead and is not conditional on the merger.

Under the terms of the deal, Micro Focus will buy Attachmate for £730m ($1.184bn) in exchange for the issue of 86.6m shares, equal to around 40% in the new company, meaning that the merger will be classed as a reverse takeover. Including Attachmate's debt of $1.166bn, the transaction is valued at $2.350bn before costs.

Attachmate is a privately-held software firm owned by an investment group led by Francisco Partners, Golden Gate Capital, Elliott Management and Thoma Bravo.

Micro Focus said that the two companies work in "adjacent and complementary" markets and share the same characteristics of high recurring revenues, high operating margins and strong cash conversion. Combined annual revenues are estimated to be around $1.4bn.

It said that the merger will create an "enlarged global infrastructure software company with a top three global market position in a number of key segments, including off-mainframe COBOL [COmmon Business-Oriented Language], mainframe modernisation, host connectivity and Linux".

Micro Focus chairman Kevin Loosemore said this was a "transformational deal" for the company and "provides us with a platform from which I am confident we can deliver significant and sustainable returns".

As the deal is classified as a reverse takeover, ordinary shares in Micro Focus willl be cancelled and an application will be made for the readmission on the premium segement of the London Stock Exchange.