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Micro Focus in Hewlett Packard deal

With sterling's pull-back, trans-Atlantic M&A deals are on the rise, but a UK software provider has bucked the trend by snaffling some prime US assets.
September 8, 2016

The share price of Micro Focus International (MCRO) surged after the software provider announced that it was merging with Hewlett Packard Enterprise's (HPE) non-core software assets in a deal worth $8.8bn (£6.6bn). The assets being spun off include Autonomy, the UK software group that HPE bought in 2011 under somewhat contentious circumstances. The proposed deal represents the largest purchase by a UK firm of a foreign technology company.

IC TIP: Buy at 2285p

Micro Focus will pay $2.5bn in cash to the US parent, and though HPE shareholders will own 50.1 per cent of the combined company, it is very much a UK-sponsored approach, totally in keeping with the aggressive acquisition strategy of Micro Focus that has effectively doubled the size of the business over the past few years.

The newly expanded entity will operate under the name Micro Focus with British management and have annual revenues in the region of $4.5bn with cash profits of $1.35bn. With the spin-off's customer base in tow, the newly merged entity will become one of Europe’s biggest software companies by revenue.