Attachmate and Micro Focus in late-stage merger talks

By Arash Massoudi. This article originally appeared on the Financial Times website, on September 14th, 2014

US software group Attachmate is in advanced talks to merge with UK rival Micro Focus, according to people familiar with the situation.

A deal could be announced in the coming week, these people said, but they cautioned that talks could still fall apart. The value of Micro Focus in a deal is likely to be at a premium to its market capitalisation, which stood at £1.17bn ($1.9bn) at the close of London trading on Friday.

The exact structure of the deal could not be ascertained, but it could be either a straightforward takeover by the US group or a merger. A deal could also provide a vehicle for a public listing for Attachmate’s private equity and hedge fund owners, allowing for a path to exit their positions.

Attachmate is owned by a consortium of investors including Francisco Partners, Golden Gate Capital and Thoma Bravo as well as hedge fund Elliott Management.

It consists of four legacy software companies and took the name of its Seattle-based business, which builds software that helps companies integrate information based on older computer systems. It also owns Suse, a German open-source software company, and Novell, which it acquired with the help of Microsoft in a $2.2bn deal in 2010.

Micro Focus also develops and sells enterprise software for ageing computer systems. It has license agreements with more than 90 per cent of the Fortune Global 100 companies, according to its website. The company has its headquarters in Newbury, west of London.

The move comes against a backdrop of widespread deal activity in the technology sector.

While the headlines have been dominated by larger tech deals, such as Facebook’s $19bn purchase of WhatsApp, much of the dealmaking has been focused around the unglamorous but essential end of the technology sector.

Semi conductors, in particular, have enjoyed a wave of consolidation, including Infineon Technologies’ acquisition this month of International Rectifier for close to $3bn. Last month, the FT reported that CSR, the UK chipmaker, had hired banks after receiving bid interest.

Elliott and Golden Gate declined to comment. Representatives for Thoma Bravo and Francisco could not immediately be reached for comment.

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