Market turmoil puts end to Micro bid talks

The Newbury-based group had set a deadline of August 19 for a deal to be concluded but said yesterday after receiving feedback from the potential bidders it had decided to terminate the talks.

Advent International, one of the potential buyers, said the current market turmoil was partly behind the decision to end the discussions, which was mutually agreed by all of the parties.

Micro Focus first announced an approach in April and confirmed twelve days ago that the talks were still ongoing, but reports over the weekend had suggested the price offered for the Berkshire-based company fell short of the board’s expectations.

Shares fell by 4 per cent as Micro Focus said takeover talks had ended, but were supported by the company’s announcement that it intends to start buying back its own shares immediately and will consult over how to hand back more cash to shareholders.

Prior to the bid talks, the firm, which specialises in software that extends the life of older IT systems, had slumped following two profit warnings and the departure of its chief executive, but its latest update this month was more upbeat and brokers are hopeful of a revival.

David Johnson, an analyst at broker Northland Capital, added that a deal had been looking increasingly unlikely given the length of time of the discussions but the recent quarterly performance was ahead of expectations and margins had picked up.

Analysts at Royal Bank of Scotland added that the ending of discussions was a good thing and that share buybacks should resume as soon as possible.

The group, which has offices in 20 countries, employs 1200 people worldwide.

The firm said its share buyback programme would resume with immediate effect.

It has shareholder authority to buy back up to 12.3 million shares and has $112m of distributable reserves.

“The board is reviewing its options to enable the group to increase the amount of distributable reserves and will consult with shareholders on the optimal use of the group balance sheet,” it added.

Last week shares in Micro Focus rose after Hewlett-Packard’s $11.7 bn bid for Autonomy ignited investor interest in the European software industry.