Hewlett-Packard Enterprise to spin off assets in $8.8B deal

Hewlett Packard Enterprise has struck a monster merger deal valued at £6.6 billion (~$8.8 billion) with UK-based Micro Focus, which will combine software assets with the company.

HPE’s chief executive Meg Whitman said the company is shedding it non-core software assets, which includes big data, enterprise security and IT operations management segments, to Micro Focus.

Under the agreement, Micro Focus will pay HPE £1.87 billion (~$2.5 billion) in cash, while HPE shareholders will own 50.1 percent of the new company.

HPE’s software division is to be bought by Micro Focus, a Newbury-based firm that was promoted to the FTSE 100 last week, becoming one of the UK’s top 100 companies.

HPE, which was spun off past year by Hewlett Packard, is now spinning off and merging its software business with UK-based Micro Focus in an effort to build shareholder value.

Shares of Hewlett Packard Enterprise closed up $0.23 or 1.05 percent on Wednesday, at $22.09.

In earlier transactions, HP Enterprise in May completed a $2.3 billion deal in China to sell a 51% stake in a venture there called H3C that sells networking, server and storage hardware and related services.

“With today’s announcement, we are taking another important step in achieving the vision of creating a faster-growing, higher-margin, stronger cash-flow company well positioned for our customers and for the future”, Whitman said in a statement.

Micro Focus declined to comment.

Hewlett Packard Enterprise (HPE) is to be spun off by HP and includes the assets of Autonomy, the United Kingdom software group that was acquired by the company for $11billion back in 2011.

HPE made a similar move back in May of this year by spinning off and merging its enterprise services division with Computer Sciences Corporation to form a new company. “Software is still a key enabler of our go-forward strategy, but we need the right assets to win in our target markets”.

He said: “The merger is consistent with our recent acquisitions of Serena Software and the Attachmate Group”.

HPE is in the process as well of doubling down in order to deliver a new group of modern, multi-cloud software that is infrastructure as a service oriented.

The deal was announced with HPE’s latest quarterly earnings.