Micro Focus sells Digital Safe business to Smarsh for $375mn

LONDON, UK: Micro Focus International has agreed definitive terms to sell its Archiving and Risk Management portfolio (Digital Safe business) to Smarsh Inc. for a total cash consideration of $375 million. Completion is expected to occur in the first quarter of next calendar year.

The Digital Safe business forms part of the Information Management and Governance (IM&G) Product Group and includes Digital Safe products and the complementary offerings of Social Media Governance, Supervisor and eDiscovery.

Stephen Murdoch, Micro Focus CEO says: “Micro Focus acquired the Digital Safe business in September 2017 as part of the HPE transaction. Since this date, we are proud of the progress made, with our focus on customer-centric innovation delivering significant improvements to the portfolio and enabling us to begin the transition to a cloud-first business model.

Looking ahead, Archiving and Risk Management is changing rapidly and becoming an increasingly specialised area. We believe that by combining the Digital Safe business with Smarsh, a leading innovator in this area, our Digital Safe customers and employees will see significant benefits and be better served for the long term.”

Brian Cramer, Smarsh CEO says: “We are delighted to announce the acquisition of the Digital Safe business from Micro Focus. Smarsh focuses its efforts on meeting the sophisticated risk, compliance and e-discovery needs of regulated industries.

We see significant opportunity in helping our existing, mutual and future customers to extend the value of their retention and oversight technology investments and to facilitate communications data strategies that will meet the challenges of tomorrow. Upon completion of the transaction, we’ll work together with our new expanded team to deliver this vision to our customers.”

In FY21, the Digital Safe business is expected to generate approximately $109m of revenue, a decline of approximately 11% at constant currency compared to the prior year.

The business is expected to contribute $30m of Adjusted EBITDA less cash costs associated with lease payments in FY21. This figure also excludes any allocation of overheads from the central functions which support this business.

As at 30 April 2021, the half year, the total gross assets of the Digital Safe Business were approximately $373m and net assets were approximately $277m, including lease obligations totalling $43m. The transfer of these lease obligations will reduce the Group’s net debt accordingly.

It is the intention of the Board to use the net proceeds of the Transaction, estimated at $335m net of fees, taxation and separation costs to reduce gross debt.

Micro Focus is a global enterprise software company supporting the technology needs and challenges of the Global 2000. www.microfocus.com

Smarsh is a global leader in electronic communications archiving solutions for regulated organizations. The Smarsh platform provides innovative capture, archiving, e-discovery, and supervision solutions across the industry’s widest breadth of communication channels. www.smarsh.com