RE:Acquisition of Compuware testing & ASQ Business

 

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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: [phone]          | 
+--------------------------------------+---------------------------------+ 
| Stephen Kelly, Chief Executive       |                                 | 
+--------------------------------------+---------------------------------+ 
| Nick Bray, Chief Financial Officer   |                                 | 
+--------------------------------------+---------------------------------+ 
| Tim Brill, Head of Corporate         |                                 | 
| Communications & IR                  |                                 | 
+--------------------------------------+---------------------------------+ 
| Financial Dynamics                   | Tel: [phone]        | 
+--------------------------------------+---------------------------------+ 
| 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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