The former maker of expensive printer ink HPE will spin off and merge its non-core software assets with Britain’s Micro Focus in a deal worth $8.8 billion.
The move is part of HPE Chief Executive Meg Whitman’s cunning plan to shift HPE’s strategy to a few key areas such as networking, storage and technology services since the company separated last year from computer and printer maker HP. It will also off-load the troubled software side of the business.
HPE acquired part of its software portfolio through the $10.3 billion purchase of Britain’s Autonomy in 2011. HP’s $11 billion purchase of Autonomy was supposed to form the central part of the US group’s move into software.
HP later wrote off three-quarters of the company’s value, accusing Autonomy executives of financial mismanagement.
Whitman said in a statement that HPE was taking another important step in achieving the vision of creating a faster-growing, higher-margin, stronger cash flow company well positioned for customers and for the future.
The deal with Micro Focus, a multinational software company based in Newbury was announced along with HPE’s latest quarterly earnings. In the third quarter, HPE reported net revenue of $12.2 billion, down 6 percent from $13.1 billion a year earlier.
The transaction is expected to be tax free to HP. Micro Focus will pay $2.5 billion in cash to HPE, while HPE shareholders will own 50.1 percent of the combined company that will operate under the name Micro Focus and be run by its executives. HP said it would pay $700 million in one-time costs related to the separation of the assets.
Other HPE assets that will be merged include software for application delivery management, big data, enterprise security, information management & governance and IT Operations management businesses.
Micro Focus has been bulking up on acquisitions to boost growth, and this would be its largest deal to date. Earlier this year, Micro Focus acquired U.S. firm Serena Software for $540 million.
Kevin Loosemore, executive chairman of Micro Focus, said that “the time is right for consolidation in the infrastructure software market and this proposed merger will create one of the leading players in this space.”
HPE is the latest firm looking to Britain for expansion opportunities after the United Kingdom voted to leave the European Union. Valuations of British companies have been relatively low given current exchange rates.
