Hewlett Packard Enterprise, also known as HPE, has put rumors to rest and disclosed that it has decided to spin-off and merge its ‘non-core’ software assets with a British software company, Micro Focus, to form a new combined entity. The transaction is valued at approximately $8.8 billion, and a majority stake will be owned in part by HPE shareholders.
The shareholders will retain a 50.1 per cent stake of the combined company on a fully diluted basis. This equity stake in Micro Focus is valued at approx. $6.3 billion, after HP Enterprise receives $2.5 billion in cash prior to the completion of this merger. The deal is expected to close in the third quarter of 2017.
HP Enterprise itself is a spin-off from the core Hewlett Packard brand, and has forged its own business model around software and infrastructure needs for cloud, network and enterprises. Thus, it will be retaining any and all assets related to the cloud and infrastructure business, but will spin-off assets including Application Delivery Management, Big Data, Enterprise Security, Information Management, Governance and IT Operations.
This move, HPE, believes gives them the leeway to explore and realize its vision of being the industry’s leading provider of hybrid, next-gen information technology services. Meg Whitman, President and CEO of HPE makes it crystal clear that HPE is still focused on software and this passion of theirs isn’t fading anytime soon.
Services and Software remain key enablers of HPE’s go-forward strategy. HPE will double down on the software capabilities that power and differentiate our infrastructure solutions and are critical in a cloud environment.
With today’s announcement, we are taking another important step in achieving the vision of creating a faster-growing, higher-margin, stronger cash flow company well positioned for our customers and for the future,
The combination of the two aforementioned businesses is expected to generate annual revenues of approximately $4.5 billion, along with a global footprint and diversified product line. The new combined entity will also have a robust go-to-market capability, thanks to its deep R&D resources and nearly 4,000 sales people worldwide.
Kevin Loosemore, Executive Chairman of Micro Focus, will now spearhead the combined entity of HP Enterprise and Micro Focus. Mike Phillips will continue to serve his role as the Chief Financial Officer.
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. The combined organization will benefit from strong positions in a number of key segments, further enhancing our customers’ ability to leverage both prior and new IT investments to exploit the latest industry innovations.
In addition to the partnership between HPE and Micro Focus, the German open-source organisation SUSE has also been announced as HP Enterprise’s preferred Linux partner. Under this commercial partnership, SUSE will be working very closely with HPE to build enterprise-grade hybrid cloud tools for its customers.