Micro Focus sold for $6bn

BY Richard Summerfield

Canadian software company OpenText has agreed to acquire UK tech firm Micro Focus in a deal worth around $6bn. The all-cash acquisition, once completed, will make OpenText one of the world’s largest software and cloud businesses.

Under the terms of the acquisition, the total enterprise value of the deal is around $6bn or £5.1bn, with an equity value of around $2.1bn (£1.8bn). The companies calculated that the per-share price offered, some 532 pence, represents a 98.3 percent premium to the closing price of Micro Focus before the deal was announced.

Micro Focus has experienced financial difficulties in recent years, with declining revenue every year since 2018. Further, its stock price has dropped over 44 percent this year and more than 89 percent for the prior five years. Regardless of these difficulties, Micro Focus remains one of the world’s largest software companies and serves thousands of organisations globally, including many of the largest companies in the Fortune Global 500 and had approximately $2.7bn pro forma trailing 12 months revenue for the period ended 30 April 2022, according to a statement announcing the deal.

“We are pleased to announce our firm intention to acquire Micro Focus, and I look forward to welcoming Micro Focus customers, partners and employees to OpenText,” said Mark J. Barrenechea, chief executive and chief technology officer at OpenText. “Upon completion of the acquisition, OpenText will be one of the world’s largest software and cloud businesses with a tremendous marquee customer base, global scale and comprehensive go-to-market. Customers of OpenText and Micro Focus will benefit from a partner that can even more effectively help them accelerate their digital transformation efforts by unlocking the full value of their information assets and core systems.”

He continued: “Micro Focus brings meaningful revenue and operating scale to OpenText, with a combined total addressable market (TAM) of $170 billion. With this scale, we believe we have significant growth opportunities and ability to create upper quartile adjusted EBITDA and free cash flows. We expect Micro Focus to be immediately accretive to our adjusted EBITDA. Micro Focus will benefit from the OpenText Business System to create stronger operations and significant cash flows, and Micro Focus customers will benefit from the OpenText Private and Public Clouds.”

OpenText intends to fund the acquisition by raising $4.6bn in new debt, $1.3bn in cash and drawing $600m from its existing revolving credit facility. OpenText said it expects cost savings of $400m after the deal closes.

News: OpenText to Acquire Micro Focus International plc

Carestream Health files for Chapter 11 bankruptcy protection

BY Richard Summerfield

X-ray and medical imaging company Carestream Health has announced that it has voluntarily filed for reorganisation under Chapter 11 of the US Bankruptcy Code in the Bankruptcy Court for the District of Delaware.

The company, founded by Eastman Kodak Co, filed for bankruptcy protection with a lender-backed proposal which would cut its debt by $470m. Under the terms of the proposal, there will be a total debt reduction of $250m more than the company’s previously announced recapitalisation agreement. This process will significantly strengthen Carestream’s balance sheet and position the company for continued success.

“We are commencing the final stage of our recapitalization process, which will significantly enhance our ability to navigate a dynamic market,” said David C. Westgate, chairman, president and chief executive of Carestream. “Since announcing our recapitalization process in April, our lenders have remained overwhelmingly supportive, and we have worked constructively with them to complete the transaction. As our talks evolved, we determined the best course of action was to implement the agreement through an expedited court-supervised process.

“With a clear path to completion, we expect to emerge from this process as a stronger partner to our customers, with significantly reduced debt and new owners who also continue to believe in the future of Carestream. Carestream has strong market opportunities ahead. I am confident in the strength of our core business and our ability to maintain market leadership moving forward,” he added.

According to a statement announcing the filing, Carestream expects to continue operating normally throughout the court-supervised process and remains focused on serving its customers and working with suppliers on normal terms. Carestream expects to move through the Chapter 11 process on an expedited basis and complete the recapitalisation in approximately 35-45 days.

Carestream has secured an $80m debtor-in-possession financing facility from some of its existing lenders to reinforce its liquidity and fund the costs of the Chapter 11 process. Carestream entities outside the US are not part of the Chapter 11 process and will continue operating as normal.

News: Medical imaging company Carestream Health files Chapter 11 bankruptcy

Canadian VC and PE markets return to pre-pandemic levels, reveals new report

BY Fraser Tennant

Canadian venture capital (VC) and private equity (PE) markets returned to pre-pandemic levels in the first half of 2022, with PE investment almost doubling, according to a new report by the Canadian Venture Capital and Private Equity Association (CVCA).

In its ‘H1 2022 VC and PE Canadian Market Overview’, the CVCA reveals that C$1.65bn was invested across 182 deals in the second quarter of 2022, bringing the total for the first half of the year to C$6.2bn invested across 371 deals.

In terms of mega-deals, eight deals worth C$50m-plus closed in Q2 2022, valued at C$799m, bringing the total for the first half of 2022 to C$4bn closed across 25 deals. Moreover, investment in the early stages in Q2 remained strong, with the highest seed stage investment and deal count on record: C$263m across 104 deals.

“VC investment performance is mirroring the 2020 market,” said Kim Furlong, chief executive of the CVCA. “In choppy waters, we need to continue to ensure Canadian companies have access to capital. Programmes like the federal government’s Venture Capital Catalyst Initiative (VCCI) will be essential to help weather unpredictability.”

Sector-wise, information, communications & technology received two-thirds of all investment in the first half of 2022, with C$4.1bn invested across 205 deals. The life sciences sector received 10 percent of investment with C$622m across 55 deals.

As far as PE activity is concerned, deals under C$25m continue to make up the largest percentage of Canadian PE activity, with 87 percent of disclosed deals in the first half of 2022 in this category. Moreover, the average deal size continues to decrease steadily, reaching an all-time low in Q2 of C$11.81m.

“Private markets are normalising to pre-pandemic levels,” added Ms Furlong, chief executive of the CVCA. ​“After an outlier 2021, investors are closely monitoring macroeconomic volatility and public market trends, which are impacting the private capital investment environment. While the landscape is more challenging as we head into the second half of 2022, PE investors continue to actively invest and largely in Canada’s small and medium enterprises (SMEs).”

The industrial and manufacturing sector saw the most PE investment activity in H1 – C$1.36bn over 101 deals – followed by information and communications technology, C$998m over 77 deals, and the life sciences sector, C$87m over 55 deals.

Ms Furlong concluded: “In a lot of ways, 2021 was an abnormal year, particularly when it came to company valuation. What we are seeing now, is the correlation between the decrease in public markets slowly permeating the private markets.”

Report: H1 2022 VC and PE Canadian Market Overview

Drugmaker Endo files for Chapter 11 amid opioid battles

BY Fraser Tennant

In a bid to weather a wave of opioid lawsuits, pharmaceutical company Endo International has filed for Chapter 11 bankruptcy as part of restructuring support agreement (RSA) with senior secured debtholders.

The company said that it initiated Chapter 11 proceedings to facilitate a sale process and provide an appropriate forum for bringing closure to opioid-related and other uncertainties, without recourse to costly and time-consuming litigation.

Under the terms of the RSA, the debtholder group has committed to providing total purchase consideration of approximately $6bn in the form of a credit bid, plus assumption of certain liabilities, for substantially all of Endo’s assets.

The RSA  will allow the company to advance its business transformation with a strengthened balance sheet to create compelling value for its stakeholders over the long term.

In addition, Endo has filed with the bankruptcy court a series of customary motions to maintain business-as-usual operations on all fronts and uphold its commitments to its stakeholders, including team members, customers, suppliers and business partners, during the Chapter 11 process.

Endo's India-based entities are not part of the Chapter 11 proceedings.

“The Chapter 11 process will enable us to continue our ongoing business transformation, including investing in our core areas of growth, as we work to execute a transaction to strengthen our balance sheet and secure a strong tomorrow,” said Blaise Coleman, president and chief executive of Endo. "By definitively addressing more than $8bn of debt that has burdened our balance sheet and establishing a pathway to closure with respect to thousands of opioid-related and other lawsuits, we will be able to move forward as a new Endo and reach our full potential."

Founded in 1997, Endo is a specialty pharmaceutical company committed to helping everyone it serves to live their best life through the delivery of quality, life-enhancing therapies. The company has global headquarters in Dublin, Ireland, with its US corporate office in Malvern, Pennsylvania.

“Our commitment to our mission, team members, customers, patients and communities will not change,” concluded Mr Coleman. “We look forward to emerging from this process better positioned to continue helping everyone we serve live their best lives.”

News: Endo files for bankruptcy as U.S. opioid litigation drags

Altera Infrastructure files for Chapter 11

BY Fraser Tennant

In a move designed to deleverage its balance sheet and position it for long term growth and success, global energy infrastructure services group Altera Infrastructure has filed for Chapter 11 bankruptcy so that it may implement a restructuring support agreement (RSA).

The RSA has been signed, or agreed to in principle by, holders of 80 percent of its funded debt obligations, which includes Brookfield Business Partners and approximately 91 percent of its bank lenders pending certain creditors’ internal credit approval processes.

The terms of the RSA contemplate more than $1bn of secured and unsecured holding company debt, $400m of preferred equity and $550m of secured asset-level bank debt, a comprehensive reprofiling of Altera’s bank loan facilities to better align cash flow with debt service obligations and the continued support of Altera’s equity sponsor, Brookfield.

In addition, Altera has obtained a commitment from Brookfield for a $50m debtor in possession (DIP) financing to help fund Altera’s restructuring process and ensure ordinary course operations remain unimpaired during the Chapter 11 process.

In conjunction with the petitions Altera has filed a series of motions, which, once approved by the bankruptcy court, will enable Altera to operate its business in the ordinary course without interruption. “We enter into this phase of our balance-sheet restructuring with the support of the majority of Altera’s secured lenders and equity sponsor Brookfield,” said Ingvild Sæther, chief executive of Altera Infrastructure Group Ltd.

A leading global energy services provider to the oil and gas industry, Altera focuses on supplying critical infrastructure assets to its customers in the offshore oil and gas regions of the North Sea, Brazil and the East Coast of Canada.

Altera’s fleet of 41 vessels includes floating production, storage and offloading units, shuttle tankers, long-distance towing and offshore installation vessels, as well as a unit for maintenance and safety.

Ms Sæther concluded: “We are confident that the Chapter 11 process will result in a comprehensive recapitalization transaction that will not only stabilise liquidity, but also deleverage our balance sheet and better position Altera for future growth.”

News: No impact to employees as Altera Infrastructure announces Chapter 11 bankruptcy