UK company Micro Focus will buy HPE's software business for $8.8bn. The deal follows rumours that the unit was up for grabs, although Micro Focus is a surprise buyer as private equity firms were thought to be the most interested.
The purchase will include key HPE software assets Autonomy and Vertica. Buying Autonomy cost HP $11.7bn alone, so it is taking a big loss once again having already written off $8.8bn from the deal in 2011.
Micro Focus will also pick up ALM and AppPulse for application delivery management, HPE Haven OnDemand, and security tools including ArcSight and Fortify.
The acquired assets will slot into Micro Focus's portfolio of Cobol tools development, identity-based access governance, application development and testing, and IT operations management. There's relatively little overlap between the HPE and Micro Focus software assets.
Kevin Loosemore, executive chairman of Micro Focus, explained that the deal underlined the firm's ongoing growth in key business markets.
“Today’s announcement marks yet another significant milestone for Micro Focus and is wholly consistent with the long-term business strategy to be the most disciplined global provider of infrastructure software," he said.
“The combination of Micro Focus with HPE Software will give customers more choice as they seek to maximise the value of existing IT assets, leveraging their business logic and data along with next-generation technologies to innovate with the lowest possible risk.”
HPE chief executive Meg Whitman claimed that the deal is advantageous for customers using the software assets moving to Micro Focus, which is better placed to serve their ongoing development.
"Micro Focus's approach to managing growing and mature software assets will ensure higher levels of investment in growth areas like big data analytics and security, while maintaining a stable platform for mission-critical software products that customers rely on," she said.
However, Whitman underlined that HPE is not moving exclusively to hardware. "I want to be crystal clear: HPE is not getting out of software. Software is still a key enabler of our go-forward strategy, but we need the right assets to win in our target markets," she said.
"Moving forward, we will double down on the software capabilities that power and differentiate our infrastructure solutions and are critical in a cloud environment."
The deal is structured so that HPE shareholders, rather than HPE directly, will inherit the 50.1 per cent stake in the newly merged software company in the form of American Depositary Shares.
This share stake is valued at $6.3bn, based on the value of Micro Focus shares on 5 September, while HPE will also receive a cash payment of $2.5bn from Micro Focus prior to completion of the merger.
HPE will nominate 50 per cent of the independent directors to the company's board, giving HPE a strong influence over the strategic direction of Micro Focus.
Slimmed down HPE, meanwhile, which posted revenue of $103.4bn for its fiscal year to the end of October 2015, will now have approximately $28bn in annual revenues, but focused on high-end servers and systems, services and software assets around cloud and software-defined tools.
Whitman claimed that the divestitures will make HPE more coherent, easier to manage and, above all, more profitable.
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