RE:Acquisition of Compuware testing & ASQ Business
May 06 2009 - 2:40AM
UK Regulatory
TIDMMCRO TIDMCMU
RNS Number : 7466R
Micro Focus International plc
06 May 2009
6 May 2009
Micro Focus International plc to acquire the Application Testing / Automated
Software Quality business of Compuware Corporation
Highlights
* Micro Focus International plc ("Micro Focus", "the Group" or "the Company", LSE:
MCRO.L), the Enterprise Application Management and Modernization software
company, announces that it has reached agreement to acquire the suite of
Application Testing / Automated Software Quality (ASQ) solutions and all related
sales, support and development infrastructure (together being the "Compuware
Testing and ASQ Business"), from Compuware Corporation ("Compuware") for a total
gross cash consideration of US$80 million.
* Compuware's Testing and ASQ Business automates quality processes within the
software development function to control, measure and manage the delivery of
results and to ensure process consistency and continuous improvement through
sophisticated workflow capabilities. These products are highly complementary to
Micro Focus' core solutions as they address a logically adjacent portion of the
software development and deployment value chain.
Background to and reasons for the Acquisition
* Micro Focus has demonstrated solid growth in the last three years with a
successful track record of acquiring and integrating businesses that supplement
the Company's strong organic revenue and margin growth. Micro Focus has made
five acquisitions since November 2006 and, as a result of effective integration
strategies, has significantly enhanced the financial performance of its enlarged
operations.
* Micro Focus has been evaluating acquisition opportunities in logically adjacent
markets as part of its original strategy review in 2006 to broaden its
addressable market and create new engines to drive significant and sustained
future organic growth through the extension of its product portfolio. As part of
this process, Micro Focus has identified the c.US$2 billion global Application
Testing / ASQ market as particularly attractive. Industry analysts believe this
market will continue to grow strongly driven by the strategic importance of ASQ
solutions in the increasingly complex enterprise IT environment. Micro Focus
already operates in this market with its Data Express product. The acquisition
of Compuware's Testing and ASQ Business is an opportunity to establish a
significant presence in this fragmented market which fits closely with Micro
Focus' existing modernization and assessment offering.
* The Micro Focus Board believes that the enlarged group would benefit from:
* a significantly expanded addressable market opportunity. The acquisition of
Compuware's Testing and ASQ Business is an opportunity to establish a
significant presence in this fragmented market, which fits closely with Micro
Focus' existing application management and modernization offering. Micro Focus
already operates in the ASQ market through its Data Express product;
* a broadened and strengthened product portfolio which will allow the enlarged
group to capture a greater portion of the software development and deployment
value chain;
* a large combined customer base, including a significant number of blue-chip
organisations;
* greater penetration of the strategically important US technology market;
* cost synergies achievable through administrative optimization and back-office
integration;
* greater scale which will enable the enlarged group to better meet the growing
demands of the combined customer base; and
* a further strengthening of Micro Focus' position as a consolidator in the global
software market while also taking advantage of the current valuation
environment.
* The acquisition will be funded from existing Micro Focus cash resources
supplemented by a new three year revolving credit facility of US$175 million
provided through a syndicated loan consortium comprising Barclays, HSBC, Lloyds
and RBS.
* The Compuware Testing and ASQ Business does not operate as a separate business
unit. Micro Focus due diligence has indicated that, had the business reported
its results on a stand-alone basis, reported revenues would be approximately
US$74 million and profit before tax would be approximately US$5 million for the
fiscal year ending 31 March 2009. Gross assets at closing are expected to be
approximately US$23 million.
* The Board of Micro Focus believes that the acquisition will be earnings
enhancing within 12 months of completion (before amortisation of intangible
assets and one-off integration and restructuring costs). As with previous
acquisitions, Compuware's Testing and ASQ Business will be integrated into Micro
Focus with a view to improving its operating margin over time. The consequent
restructuring charge is expected to be approximately US$7 million in the
financial year to 30 April 2010.
* The Directors of Compuware have unanimously approved the terms of the
acquisition, which is subject to US antitrust approvals and customary closing
conditions. The transaction is expected to close before the end of June 2009.
Commenting on the acquisition, Stephen Kelly, Chief Executive Officer of Micro
Focus International plc, said:
"Micro Focus sees significant value for customers and shareholders in this
proposed transaction. Acquiring the Compuware Testing and ASQ business is a
logical extension to our existing application management proposition, and we see
strong growth potential in this market. Our successful track record of five
effective integrations during the past three years equips us well to rapidly
harness the benefits of this proposed acquisition."
Bob Paul, Compuware President and Chief Operating Officer, said:
"This agreement represents a key accomplishment in Compuware's Business Service
Delivery strategy for ensuring applications work well and deliver business
value. By focusing Compuware's human, technical and financial resources on core
market categories where we can be best in the world - like end-to-end
application performance - Compuware will deliver more differentiated value to
our customers and better bottom-line results for our investors and employees."
Enquiries:
+--------------------------------------+---------------------------------+
| Micro Focus | Tel: +44 (0)1635 32646 |
+--------------------------------------+---------------------------------+
| Stephen Kelly, Chief Executive | |
+--------------------------------------+---------------------------------+
| Nick Bray, Chief Financial Officer | |
+--------------------------------------+---------------------------------+
| Tim Brill, Head of Corporate | |
| Communications & IR | |
+--------------------------------------+---------------------------------+
| Financial Dynamics | Tel: +44 (0)20 7831 3113 |
+--------------------------------------+---------------------------------+
| Charles Palmer /Haya Chelhot/ Nicola | |
| Biles | |
+--------------------------------------+---------------------------------+
Notes to editors:
Arma Partners LLP acted as financial adviser to Micro Focus and Updata Advisors,
Inc. acted as financial adviser to Compuware. Micro Focus was advised by KPMG
Corporate Finance Debt Advisory with respect to arranging the acquisition
financing facilities.
No financial disclosure in this announcement is intended to be or should be
taken to be an estimate of the future profits or otherwise of either Micro Focus
or any part of Micro Focus Group. Any statement relating to earnings enhancement
does not mean that the future earnings per share of Micro Focus will necessarily
match or exceed its historical published earnings per share.
About Micro Focus
Micro Focus, a member of the FTSE 250, provides innovative software that allows
companies to dramatically improve the business value of their enterprise
applications. Micro Focus Enterprise Application Modernization and Management
software enables customers' business applications to respond rapidly to market
changes and embrace modern architectures with reduced cost and risk. For
additional information please visit www.microfocus.com
About Compuware
Founded in 1973, Compuware provides software, experts and best practices to
ensure applications work well and deliver business value. Its unique approach,
Business Service Delivery, helps CIOs optimize end-to-end application
performance for leading businesses around the world, including 46 of the top 50
Fortune 500 companies. Learn more at www.compuware.com.
This information is provided by RNS
The company news service from the London Stock Exchange
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