Hewlett Packard Enterprise (HPE) has announced that the company will spinoff their non-core software assets to Micro Focus (LON: MCRO) in a deal valued at $8.8 billion. Micro Focus has been in talks with HPE since February and approached the company.
Micro Focus stock soared on the announcement and is up 17.49% on the London Stock Exchange.
The deal will lessen the blow of HP’s attempt to enter into the software market five years ago. The company purchased Autonomy, a British company, in a deal worth $10.3 billion. The deal was an attempt to lessen HP’s reliance on a struggling PC market, but the company struggled to make the venture profitable.
Autonomy will be part of the Micro Focus deal.
HPE will focus on key areas, such as storage, networking and technology serviced, according to the company’s Chief Executive Meg Whitman.
Micro Focus has a reputation for buying software companies and older software that it aims to keep profitable. The company also purchased SUSE, a Linux operating system, previously. The deal with HPE will help boost Micro Focus to the top of the British software market.
The deal is a smart decision by HPE after a struggling third quarter, where profits fell 6% year over year. HPE will also benefit from a reported tax-free sale.
The deal will include $2.5 billion in cash and the rest in shares of the company. HPE shareholders will own 50.1% of the combined company, but the company will remain under the Micro name and will be run by the company’s current executives. HPE will pay $700 million in one-time costs.
Micro Focus and HPE’s assets will be merged in the deal and will include Autonomy as well as software for big data, management and enterprise security. The deal was in the works months before Brexit, and was announced on the same day that Dell and EMC merged in a $60 billion deal.