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Rocket Software, Inc. (“Rocket Software”), a global technology leader driving modernisation for the world’s largest companies, announced it has signed a definitive agreement to acquire the Application Modernization and Connectivity business (AMC) of OpenText, which was formerly part of Micro Focus. The total purchase price is USD $2.275 billion.

For decades, Rocket Software has been the partner solving complex IT challenges for the largest and most innovative organisations, across infrastructure, data, and applications. Rocket Software’s hybrid cloud strategy empowers customers to optimise their application portfolio wherever they are in their modernisation journey, enabling them to bridge the gap to modern use cases without disrupting their mission-critical operations. This approach allows organisations to benefit from the mainframe’s security and dependability while also taking advantage of powerful analytics tools in the cloud.

AMC has been a leader in application modernisation for many years, providing industry-leading tools including COBOL and host connectivity. These tools enable organisations to leverage their core applications and offer flexibility for modernisation, allowing them to run applications wherever they choose. With AMC, Rocket Software will have a more diverse modernisation portfolio that aligns with customer demands, whether on-premises or through a hybrid cloud strategy.

Achieving Key Strategic Objectives

Rocket Software’s acquisition of AMC achieves five key strategic objectives, including:

• Meeting organisations at any stage of their modernisation journeys with a comprehensive product portfolio addressing all use cases, spanning from mainframe to hybrid workloads.
• Enabling customers to derive value from their decades of investment in the core applications that run their business while also innovating and taking full advantage of new applications and technologies.
• Solidifying Rocket Software as a leader in hybrid cloud, deepening current customer relationships, and ensuring sustainable growth in the legacy enterprise IT market. The company is positioned not only to address immediate customer needs but also to guide customers through their modernisation journey over time.
• Extending and complementing Rocket Software’s industry-leading R&D expertise, fostering continuous innovation through the application of emerging technologies like generative AI.
• Further strengthening Rocket Software’s position as the partner of choice to meet industry and customer needs and deliver superior customer success.

“We are proud to be the preferred partner dedicated to meeting our customers at any point in their modernisation journeys and minimising unnecessary risk to their business operations,” said Milan Shetti, Rocket Software President and CEO. “For the many enterprise organisations who are built on the mainframe and ready to unlock opportunity using hybrid cloud, reality calls for a continuum with solutions and expertise that span both worlds. Welcoming the AMC business and its talented team to Rocket Software marks an extraordinary moment for the company, the market, and the thousands of organisations who share in our vision of making the best-of-both-worlds a reality.”

Meeting Customers’ Needs and Accelerating Transformation

By combining Rocket Software’s industry-leading customer service with more resources to innovate, the company will be uniquely positioned in the market to not only meet customers’ immediate needs but also to help them transform over time. These deep customer relationships will strengthen retention, broaden cross-sell opportunities, and drive sustainable growth for the business.

Rocket Software intends to fund the acquisition with a combination of new cash equity from its existing shareholders, committed debt financing, and cash from its balance sheet. The debt financing is expected to include incremental senior secured term loans and new senior secured notes. Inclusive of expected synergies, the company expects the acquisition will be leverage neutral on a total leverage basis, but leveraging on a secured basis.

The deal is expected to close in Q2 2024 ending 30 June 2024, subject to receipt of applicable regulatory approvals and other customary closing conditions.

RBC Capital Markets, LLC, Barclays Capital Inc., Deutsche Bank Securities Inc., and UBS Securities LLC are serving as financial advisors to Rocket Software. Ernst & Young LLP served as Accounting Advisor to Rocket Software. Kirkland & Ellis LLP served as Legal Advisor to Rocket Software. Debt financing for the transaction will be provided by RBC Capital Markets, Barclays Capital, Deutsche Bank Securities, UBS Securities, Citigroup Global Markets, HSBC Securities, Mizuho Securities, and SMBC Nikko Securities.

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