OpenText to acquire Zix in $860 million deal meant to bolster Microsoft relationship

Kitchener-Waterloo software company OpenText has reached an agreement to acquire Texas-based Zix in a deal worth $860 million USD, including debt.

Zix, which is based in Dallas and was founded in 1998, offers software-based email encryption, threat protection, and compliance cloud solutions for small to medium-sized businesses (SMBs). The deal, which remains subject to regulatory approvals and closing conditions, is expected to close within the next three months.

Through the acquisition, OpenText aims to establish a “powerhouse SMB platform for data protection, threat management, email security and compliance solutions” by coupling and integrating Zix’s offerings with the products of previous acquisition Carbonite and Webroot.

With the deal, OpenText aims to establish a “powerhouse SMB platform” for security and compliance.

OpenText acquired Boston’s Carbonite and its subsidiary Webroot in 2019 for $1.45 billion. Madhu Ranganathan, OpenText’s executive vice president and chief financial officer, said the company’s acquisition and integration of data security firm Carbonite (parent company of Webroot), gave OpenText “the confidence and readiness to expand even further into the SMB market.”
 

Founded in 1991, OpenText develops and sells enterprise information management software. The Canadian company, which trades on the Nasdaq and Toronto Stock Exchange (TSX), plans to finance its acquisition of Zix using its existing cash on hand.

OpenText plans to pay $8.50 USD per share in cash for Nasdaq-listed Zix. According to OpenText, the total purchase price of $860 million is approximately 3.5 times Zix’s trailing twelve month revenues, as of the end of September.

RELATED: OpenText to buy data security firm Carbonite for $1.88 billion CAD

According to OpenText CEO and CTO Mark J. Barrenechea, Zix will “deepen [OpenText’s] technology and go-to-market relationship with Microsoft.” The CEO claimed the deal demonstrates OpenText’s commitment to both the enterprise and SMB markets.

“I look forward to welcoming Zix customers, partners and employees to OpenText,” said Barrenechea, who added that OpenText’s acquisition of Zix will bring about 5,600 managed service providers (MSPs) to the firm and create cross-sell opportunities.

OpenText said it expects the acquisition of Zix to expand its cloud revenues, adjusted earnings before income, taxes, depreciation, and amortization (EBITDA), and cash flows during its next fiscal year.

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In the first quarter of fiscal 2022, OpenText’s revenue grew 3.5 percent year-over-year to just over $832 million. The company generated a profit of nearly $132 million, an increase of about 28 percent compared to the same period last year. Barrenchea said these record results were powered by OpenText’s organic growth.

Following news of the deal, OpenText’s shares were trading slightly above where they began the day, at $64.85 CAD apiece at time of publication.

Feature image from Wikimedia Commons

Josh Scott

Josh Scott

Josh Scott is a BetaKit staff writer who loves to tell Canadian business and tech stories. His coverage is more complete than his moustache.