OpenText to Focus on Cloud and AI Opportunity
Within Information Management
WATERLOO, ON, Nov. 28,
2023 /CNW/ -- Open Text Corporation (NASDAQ: OTEX),
(TSX: OTEX), today announced that it has reached a definitive
agreement to divest its AMC business to Rocket Software, Inc., a
Bain Capital portfolio company ("Rocket Software"), for
US$2.275 billion in cash. OpenText's
AMC business provides market leading mainframe modernization and
connectivity software to more than 10,000 customers enabling them
to run mission-critical business applications in hybrid cloud
environments. Benefits of the transaction include:
- Reinforces and expands OpenText's focus on Cloud and AI
- Results in more predictable growth
- Increases focus on cloud growth opportunities
- Accelerates de-leverage plan, expect to be under 3x
Consolidated Net Leverage Ratio(1) within 90 days
of closing
- Returns OpenText to capital flexibility, including potential
future share buybacks
The growth prospects
for Information Management have never been better. We are divesting
our mainframe business so we can singularly focus on the powerful
Cloud and AI opportunities within Information Management. This
divestiture will better position us to move with more speed in
higher organic growth areas such as Cloud capabilities and AI,
strengthens our balance sheet to achieve our deleveraging targets
ahead of schedule and returns the company to capital flexibility.
This divestiture supports our focus on creating value for our
shareholders."
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Mark J.
Barrenechea, OpenText CEO & CTO
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About the Transaction:
- $2.275B all-cash purchase price
before taxes and fees
- Sale price of 4.6x AMC's F'23 revenue of approximately
$500M(2)
- Sale price of 8.3x AMC's F'23 Adjusted EBITDA of approximately
$275M(2)
- Net proceeds to reduce debt, to be applied to the Acquisition
Term Loan and Term Loan B
- Expect to close in OpenText's fourth fiscal quarter ending
June 30, 2024, subject to regulatory
approvals and customary closing conditions
The combination of AMC and Rocket Software's highly
complementary product portfolios will create one of the world's
largest IT and mainframe modernization and connectivity software
companies. Under the terms of the agreement, the software,
associated services, and approximately 750 employees of AMC will be
integrated into Rocket Software.
Until closing, OpenText and Rocket Software will continue to
constructively collaborate to protect customer investments and
expand offerings for joint customers.
Goldman Sachs & Co. LLC is serving as sole financial advisor
to OpenText and Cleary Gottlieb
Steen & Hamilton LLP is acting as legal advisor to
OpenText.
Conference Call Information
The public is invited to listen to the OpenText conference call
today at 5:00 p.m. ET (2:00 p.m. PT). For instant access to the
conference call use: Call Me Link. Alternatively, dial one of the
following numbers to join the queue to speak with an operator:
1-800-319-4610 (toll-free) or +1-604-638-5340 (international).
Please dial-in 15 minutes ahead of time to ensure proper
connection. Alternatively, a live webcast of the conference call
will be available on the Investor Relations section of the
Company's website at
http://investors.opentext.com/investor-events-and-presentations.
A replay of the call will be available beginning November 28, 2023 at 6:30
p.m. ET through 11:59 p.m. on
December 12, 2023 and can be accessed
by dialing 1-855-669-9658 (toll-free) or +1-604-674-8052
(international) and using passcode 0572 followed by the number
sign.
More information can be found in our presentation at
https://investors.opentext.com.
About OpenText
OpenText, The Information Company™, enables organizations to
gain insight through market leading information management
solutions, powered by OpenText Cloud Editions. For more information
about OpenText (NASDAQ: OTEX, TSX: OTEX) visit opentext.com.
Cautionary Statement Regarding Forward-Looking
Statements
Certain statements in this press release, including statements
about Open Text Corporation ("OpenText" or "the Company") regarding
the market size of its business and benefits to customers thereof;
details of the transaction including timing thereof; the benefits
of the transaction, including reinforcing and expanding OpenText's
focus on Cloud and AI, resulting predictable growth, increasing
focus on Cloud growth opportunities, strengthening of balance
sheet, accelerated deleverage plan and increased future capital
flexibility, including potential future share buybacks; growth
prospects of Information Management; cloud and ARR growth; creating
value for shareholders; use of proceeds from the transaction; the
complementary nature of the businesses; intention to collaborate to
protect customer investments and expand offerings; projected
financial information and other matters, which may contain words
such as "anticipates", "expects", "intends", "plans", "believes",
"seeks", "estimates", "may", "could", "would", "might", "will" and
variations of these words or similar expressions are intended to
identify forward-looking statements or information under applicable
securities laws (forward-looking statements). In addition, any
statements or information that refer to expectations, beliefs,
plans, projections, objectives, performance or other
characterizations of future events or circumstances, including any
underlying assumptions, are forward-looking statements, and are
based on our current expectations, forecasts and projections about
the operating environment, economies and markets in which we
operate. Forward-looking statements reflect our current estimates,
beliefs and assumptions, which are based on management's perception
of historic trends, current conditions and expected future
developments, as well as other factors it believes are appropriate
in the circumstances, such as certain assumptions about the
economy, as well as market, financial and operational assumptions.
Management's estimates, beliefs and assumptions are inherently
subject to significant business, economic, competitive and other
uncertainties and contingencies regarding future events and, as
such, are subject to change. We can give no assurance that such
estimates, beliefs and assumptions will prove to be correct. Future
share buybacks are also subject to the final determination and
discretion of the Board of Directors, as well as regulatory
approvals. Forward-looking statements involve known and unknown
risks and uncertainties such as those relating to: receipt of
regulatory approvals and achievement of customary closing
conditions for the transaction; all statements regarding the
expected future financial position, results of operations, cash
flows, dividends, future share buybacks, financing plans, business
strategy, budgets, capital expenditures, competitive positions,
growth opportunities, plans and objectives of management, including
any anticipated synergy benefits; our ability to successfully
divest the business and complete the transaction, including
incurring unanticipated costs, delays or difficulties; and our
ability to develop, protect and maintain our intellectual property
and proprietary technology and to operate without infringing on the
proprietary rights of others. We rely on a combination of
copyright, patent, trademark and trade secret laws, non-disclosure
agreements and other contractual provisions to establish and
maintain our proprietary rights, which are important to our
success. From time to time, we may also enforce our intellectual
property rights through litigation in line with our strategic and
business objectives. The actual results that OpenText achieves may
differ materially from any forward-looking statements. For
additional information with respect to risks and other factors
which could occur, see the Company's Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q and other securities filings with
the Securities and Exchange Commission (SEC) and other securities
regulators. Readers are cautioned not to place undue reliance upon
any such forward-looking statements, which speak only as of the
date made. Unless otherwise required by applicable securities laws,
the Company disclaims any intention or obligation to update or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise. Further, readers should
note that we may announce information using our website, press
releases, securities law filings, public conference calls, webcasts
and the social media channels identified on the Investors section
of our website (https://investors.opentext.com). Such social media
channels may include the Company's or our CEO's blog, X, formerly
known as Twitter, account or LinkedIn account. The information
posted through such channels may be material. Accordingly, readers
should monitor such channels in addition to our other forms of
communication.
Non-GAAP Financial Measures
This press release includes certain non-GAAP measures. Please
refer to the Company's "Reconciliation of selected GAAP-based
measures to Non-GAAP-based measures" included within the Company's
current and historical filings on Forms 10-K, 10-Q and 8-K for more
information on the use of non-GAAP measures by the Company.
Note: All dollar amounts in this press release are in US dollars
unless otherwise indicated.
(1) Consolidated Net Leverage Ratio (proforma) is calculated
using bank covenant methodology.
(2) Amounts represent estimated AMC's unaudited historical
pro forma revenues and adjusted EBITDA for OpenText's Fiscal 2023
period ended June 30, 2023. For the
period of July 1, 2022 to
January 31, 2023 the unaudited
historical pro forma results are presented under International
Financial Reporting Standards (IFRS) and the results for the period
of February 1, 2023 to June 30, 2023 are presented in accordance with
United States generally accepted
accounting principles (U.S. GAAP). The estimated unaudited
historical pro forma revenues and adjusted EBITDA amounts do not
include adjustments to convert IFRS results from the period of
July 1, 2022 to January 31, 2023 to U.S. GAAP.
OTEX-MNA
Copyright ©2023 Open Text. OpenText is a trademark or registered
trademark of Open Text. The list of trademarks is not exhaustive of
other trademarks. Registered trademarks, product names, company
names, brands and service names mentioned herein are property of
Open Text. All rights reserved. For more information visit:
http://www.opentext.com/who-we-are/copyright-information.
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