Open Text Corp (USA) (NASDAQ:OTEX) has announced plans to purchase a unit from Dell for $1.62 billion.
The deal will have OpenText acquiring Dell EMC’s Enterprise Content Division. This will include the Documentum, InfoArchive and LEAP products lines owned by the unit. This will have the software, associated services, and employees of the division merging with OTEX.
OpenText’s offer of $1.62 billion for the Enterprise Content Division is 2.7 times more than the division’s revenue of $599 reported in 2015. OTEX said it expects the division to be integrated into its operating model within the first 12 months. It also expects it to be immediately accretive to its earnings.
Barclays is acting as OpenText’s financial advisor for the deal. It has made a commitment of $1 billion in debt to help fund the transaction. The final method of payment hasn’t been decided yet. It may use a combination of debt and cash on hand. Dell got its financial advice for the transaction from Morgan Stanley & Co. LLC.
OpenText says that it expects the acquisition of Dell EMC’s Enterprise Content Division to enhance its Enterprise Information Management offerings. It will do this with a portfolio focused on Enterprise Content Management and Information Life Cycle Management.
OpenText still needs to meet customary closing conditions before the deal can be completed. This includes approval from regulators. If the deal gets approval, it is expected to be completed with 90 days to 120 days.
“OpenText and Dell EMC also announced today their intention to negotiate and enter into a strategic commercial partnership to expand customer offerings and to better serve customer needs,” OTEX said in a statement.
OTEX stock was up 8% as of Monday afternoon.
