PALO ALTO — Hewlett Packard Enterprise announced it will spin-off and merge its non-core software assets with Micro Focus based in the UK in a transaction valued at approximately $8.8 billion.
The combination of these software assets – which includes HPE’s Application Delivery Management, Big Data, Enterprise Security, Information Management & Governance and IT Operations Management businesses – and Micro Focus’ highly complementary portfolio will create one of the world’s largest pure-play software companies. The new company will be known as Micro Focus.
At the same time, the move enables a standalone HPE with $28 billion in annual revenue to realize its vision of being the industry’s leading provider of hybrid IT, built on the secure, next-generation, software-defined infrastructure that will run customers’ data centers today, bridge them to multi-cloud environments tomorrow, and enable the emerging intelligent edge that will power campus, branch and IoT applications for decades to come.
“With today’s announcement, we are taking another important step in achieving the vision of creating a faster-growing, higher-margin, stronger cash flow company well positioned for our customers and for the future,” said Meg Whitman, President and Chief Executive Officer of HPE.
The combination of HPE’s software assets with Micro Focus is expected to create a business with annual revenues of approximately $4.5 billion. The combined company will have strong recurring revenue streams, global reach and be well diversified across product lines – spanning IT operations, security, information management, big data analytics, cloud, open source and development. In addition, the company will have a strong go-to-market capability with nearly 4,000 salespeople worldwide, and deep R&D resources to deliver best-in-class solutions to customers and partners.
The combined company will be led by Kevin Loosemore, Executive Chairman of Micro Focus, and Mike Phillips will serve as Chief Financial Officer.
HPE shareholders will own 50.1% of the combined company. This equity stake in Micro Focus is valued at approximately $6.3 billion based on the closing price of Micro Focus shares as of market close on September 5, 2016. Micro Focus will continue to be listed on the London Stock Exchange.
HPE will also receive a $2.5 billion cash payment prior to the completion of the merger, resulting in total consideration to HPE and its shareholders of approximately $8.8 billion. The transaction is expected to be tax-free to HPE.