Kitchener-Waterloo-based OpenText has closed its acquisition of British SaaS company Micro Focus for $5.8 billion USD, which has led to layoffs.
OpenText said that it expects to balance the combined entities by reducing its workforce by eight percent, due to the acquisition of Micro Focus.
OpenText said these layoffs will amount to “cost synergies” of $400 million. As a consolidated team, OpenText and Micro Focus have 25,000 employees combined. Prior to joining OpenText, Micro Focus claimed over 11,000 employees across 48 countries.
“We have a structured and disciplined approach to M&A. The last six months of planning has led us to a defined integration plan.”
Micro Focus’ acquisition was funded by $4.6 billion in new debt, $1.3 billion in cash, and a $600 million draw from OpenText’s existing revolving credit facility.
Spun out of the University of Waterloo in 1991, OpenText provides an integrated information management platform for businesses. It first went public on Nasdaq in 1996, and on the Toronto Stock Exchange in 1998 under the ticker symbol ‘OTEX.’
OpenText has been active in its acquisition strategy for several years. Past examples include its $1.06 billion acquisition of GXS, which added B2B integration and cloud-based fax services to its product suite. More recently, OpenText purchased Texas-based Zix in 2021 for $860 million USD.
According to OpenText CEO and CTO Mark Barrenechea, OpenText has a “structured and disciplined approach to [mergers and acquisitions],” adding that six months of planning has led to a defined integration plan between MicroFocus and OpenText.
As OpenText grew its business in part due to acquisitions, so did Micro Focus. Before becoming an OpenText company, Micro Focus has bought a number of legacy software firms since 1998, like Borland, Novell, and Cobol-IT. In 2019, Micro Focus acquired Kanata-based cybersecurity startup Interset.
Founded in 1978, Micro Focus’ portfolio comprises software solutions for identity access and security, development and IT operations management, networking, and host connectivity, among others. It went public on the London Stock Exchange in May 2005.
Though the current volatile market conditions have led to several acquisitions in the tech sector across Canada and beyond, Micro Focus has demonstrated struggles for a number of years.
Following its $8.8 billion merger with Hewlett Packard Enterprise in 2017, Micro Focus’ shares plunged 46 percent in 2018 after the company said technical problems related to the consolidation of its systems with HPE would lead to lower than expected sales. Also in 2018, Micro Focus sold its Suse subsidiary to EQT Partners for $2.5 billion USD. Micro Focus acquired Suse in 2014.
OpenText said that it expects Micro Focus to “benefit from the OpenText Business System to create stronger operations and significant cash flows, and Micro Focus customers will benefit from the OpenText Private and Public Clouds.”
For its part, OpenText’s stock price has declined by 26 percent over the past year, trading at $44 CAD at press time. OpenText’s shares were valued at $60 in February 2022. OpenText is set to report its second fiscal quarter 2023 financial results on Thursday.