Micro Focus International is to acquire Hewlet Packard Enterprise's software business segment (HPE Software) in a merger that carries a transaction value of $8.8bn. It said this was a rare opportunity to significantly increase scale and breadth via the combination with a business operating in adjacent and complementary product areas with similar characteristics and benefiting from a high proportion of recurring revenues and strong cash conversion. The merger had been agreed by both companies. Micro Focus International's executive chairman, Kevin Loosemore, said the deal marked another significant milestone for the company, and was wholly consistent with its long-term business strategy. "The merger will create one of the world's largest infrastructure software companies with leading positions across a number of key products and represents a compelling opportunity to create significant value for both companies' shareholders by applying Micro Focus' proven approach to efficient management of mature software products," he said. "The combination will give customers more choice as they seek to maximize the value of existing IT assets, leveraging their business logic and data along with next-generation technologies to innovate in new ways with the lowest possible risk." The consideration comprised: - The issuance of American Depository Shares ("ADSs") to HPE shareholders representing Micro Focus shares (the "Consideration Shares") so that immediately following completion of the Merger ("Completion") HPE shareholders will own 50.1% of the fully diluted share capital of the combined group (the "Enlarged Group") and; - Consideration to HPE comprises a pre-Completion payment of $2.5 billion (subject to certain adjustments) which will be financed through newly incurred indebtedness of HPE Software - $400 million return of value to Micro Focus shareholders to be paid pre-Completion.
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