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Open Text Weighs Takeover Offer for Rival Sofware Firm Micro Focus

Scott Deveau, Dinesh Nair and Ruth David

(Bloomberg) -- Canada’s Open Text Corp. is weighing a takeover bid for rival software firm Micro Focus International Plc, according to people familiar with the matter.

Open Text is speaking to potential advisers about whether to make an offer, said the people, who asked not to be identified because the matter is private. No final decisions have been made and Open Text could opt to not proceed with an offer, they said.

Open Text “notes the recent press speculation and confirms that it is not considering a potential acquisition of Micro Focus,” it said in a statement late Friday.

Newbury, U.K.-based Micro Focus has a market value of about 3.6 billion pounds ($4.6 billion) while Waterloo, Ontario-based Open Text has a market value of about $10.9 billion. Micro Focus’s American depository receipts jumped as much as 13% on the news.

A representative for Micro Focus declined to comment.

Forecast Cut

Micro Focus, whose shares have fallen 35% this year in London, cut its full-year revenue forecast in August and said it was accelerating a strategic review of its operations.

As part of the review, Micro Focus is open to options ranging from partial sale to full takeover, the people said. Any deal for the company would be challenging for a buyer because of its nearly $5 billion of debt and declining growth prospects, they said.

Micro Focus has built a business model on acquiring legacy software assets and squeezing out costs. Last year, the company agreed to sell its infrastructure software business SUSE to private equity firm EQT Partners AB for $2.54 billion in cash.

Micro Focus agreed in 2016 to merge with Hewlett Packard Enterprise Co.’s non-core software assets in a deal worth $8.8 billion.

Open Text makes software used for searching corporate intranets and managing documents. In 2017, it acquired Dell Technologies Inc.’s enterprise content division for $1.6 billion.

(Updates with statement in third paragraph.)

--With assistance from Gillian Tan and Liana Baker.

To contact the reporters on this story: Scott Deveau in New York at sdeveau2@bloomberg.net;Dinesh Nair in London at dnair5@bloomberg.net;Ruth David in London at rdavid9@bloomberg.net

To contact the editors responsible for this story: Daniel Hauck at dhauck1@bloomberg.net, Matthew Monks, Michael Hytha

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