Micro Focus agrees sale of SUSE business for $2.5bn

Micro Focus has agreed to sell its SUSE software business to Swedish private equity group EQT for $2.5bn in cash.

The company said it would use the proceeds to pay some of its debt and for general corporate purposes, while it might also be used to return to shareholders.

Micro Focus said the consideration for the disposal of the SUSE business - which develops, markets and supports an enterprise grade Linux operating system - represents a "highly attractive" enterprise valuation at around 7.9x revenue and 26.7x adjusted operating profit for the twelve months ended 31 October 2017.

The company said EQT provides a strong long-term investor for the business and allows Micro Focus to continue to focus on its longstanding strategy of delivering value to customers and shareholders through effective management of infrastructure software assets in an increasingly consolidating sector.

Micro Focus started working with the SUSE business in November 2014, following its acquisition of The Attachmate Group. At the time of the acquisition, the business represented just over a fifth of the revenues of The Attachmate Group, which it bought for $2.35bn.

Executive chairman Kevin Loosemore said: "It was clear from the outset that the SUSE business was an outstanding business with great people, great customers and fantastic products in a vibrant and dynamic market.

"In the three and a half years since that time we have invested significantly in the SUSE business. Executing as a separate product portfolio has enabled Nils Brauckmann, CEO SUSE, and the team to deliver against the SUSE business growth charter and enabled the SUSE business to become a market leader in enterprise-grade, open source software-defined infrastructure and application delivery solutions to the benefit of customers and partners.

"We are therefore delighted that this investment has generated substantial shareholder value and provided further vindication of our portfolio approach to software management.”

Loosemore said the company will evaluate over the coming months how best to deploy the net proceeds of the disposal "for the benefit of shareholders".

CMC Markets analyst David Madden said: "The trimming down of the business and the promise of higher capital returns has improved investor confidence, especially in light of the profit warning in March. The share price has been in recovery since March, and if the upward trend continues it could target 1,500p."

At 1130 BST, the shares were up 4.8% to 1,387p.