ACQUISITIONS

12 Months Ended

Jun. 30, 2023

Business Combination and Asset Acquisition [Abstract]

Fiscal 2023 Acquisitions

Acquisition of Micro Focus

On January 31, 2023, we acquired all of the issued and to be issued share capital of Micro Focus for a total purchase price of $6.2 billion, inclusive of Micro Focus’ cash and repayment of Micro Focus’ outstanding indebtedness, subject to final adjustments.

In connection with the financing of the Micro Focus Acquisition, concurrent with the announcement of the acquisition on August 25, 2022, the Company entered into the Acquisition Term Loan and Bridge Loan as well as certain derivative transactions. On December 1, 2022, the Company issued and sold $1.0 billion in aggregate principal amount of 6.90% Senior Secured Notes due 2027, amended the Acquisition Term Loan and terminated the Bridge Loan. On January 31, 2023, we drew down the entire aggregate principal amount of $3.585 billion of the Acquisition Term Loan, net of original issuance discount and other fees, and drew down $450 million under the Revolver. We used these proceeds and cash on hand to fund the purchase price consideration and repayment of Micro Focus’ outstanding indebtedness. In conjunction with the closing of the Micro Focus Acquisition, the deal-contingent forward contracts and non-contingent forward contract, as described in Note 17 “Derivative Instruments and Hedging Activities,” were settled.

The results of operations of Micro Focus have been consolidated with those of OpenText beginning February 1, 2023.

Preliminary Purchase Price Allocation

The recognized amounts of identifiable assets acquired and liabilities assumed, based on their fair values as of January 31, 2023, are set forth below:


Cash and cash equivalents	$	541,582
Accounts receivable, net of allowance for credit losses (1)	407,379
Other current assets	290,324
Non-current tangible assets	444,618
Goodwill (2)	3,417,635
Intangible customer assets	2,162,400
Intangible technology assets	1,392,300
Accounts payable and accrued liabilities	(505,737)
Deferred revenues	(1,107,021)
Other liabilities	(796,498)
Net Assets Acquired	$	6,246,982

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(1)The gross amount receivable was $418.2 million of which $10.8 million of this receivable was expected to be uncollectible.

(2)The goodwill of $3.4 billion is primarily attributable to the synergies expected to arise after the acquisition. There is $67.3 million of goodwill that is deductible for tax purposes.

Acquisition-related costs for Micro Focus included in “Special Charges (Recoveries)” in the Consolidated Statements of Income for the year ended June 30, 2023 was $48.3 million.

A settlement related to Micro Focus’ securities litigation that was agreed to prior to the Micro Focus Acquisition has been accrued as part of the liabilities assumed. This settlement, which the court has informed the parties will be approved, will be fully paid from insurance coverage, and therefore a receivable has been recognized as part of the assets acquired. During the third quarter of Fiscal 2023, payment was made into escrow by insurers, and therefore both the associated receivable and liability are no longer included on the Consolidated Balance Sheets as of June 30, 2023.

The finalization of the above purchase price allocation is pending the finalization of the valuation of fair value for the assets acquired and liabilities assumed, including intangible assets and taxation-related balances as well as for potential unrecorded liabilities. We expect to finalize this determination on or before our quarter ending March 31, 2024.

The amount of Micro Focus’ revenues and net loss included in our Consolidated Statements of Income for the year ended June 30, 2023 is set forth below:


	February 1, 2023 – June 30, 2023
Revenues	$	976,537
Net Loss (1)	$	(94,741)

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(1)Net loss for the year ended includes one-time fees of approximately $82.9 million on account of special charges and $202.4 million of amortization charges relating to intangible assets.

The unaudited pro forma revenues and net income of the combined entity for the year ended June 30, 2023 and 2022, respectively, had the Micro Focus Acquisition been consummated on July 1, 2021, are set forth below:


	Year Ended June 30,
Supplemental Unaudited Pro Forma Information	2023		2022
Revenues	$	5,933,106	$	6,248,335
Net income (loss) (1)	(500,105)		206,985
Net income (loss) attributable to OpenText (1)	(500,292)		206,816

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(1)Included in the pro forma net loss for the year ended June 30, 2023, is a $448.2 million goodwill impairment recorded by Micro Focus in its pre-acquisition historical results as a result of the Company’s offer to acquire Micro Focus at a price of 532 pence per share.

The unaudited pro forma financial information in the table above is presented for information purposes only and is not indicative of the results of operations that would have been achieved if the Micro Focus Acquisition had taken place at the beginning of the periods presented or the results that may be realized in the future.

Fiscal 2022 Acquisitions

Acquisition of Zix Corporation

On December 23, 2021, we acquired all of the equity interest in Zix Corporation (Zix), a leader in SaaS based email encryption, threat protection and compliance cloud solutions for small and medium-sized businesses (SMB). Total consideration for Zix was $894.5 million paid in cash, inclusive of cash acquired and $18.6 million relating to the cash settlement of pre-acquisition vested share-based compensation that was previously accrued but since paid as of June 30, 2022. In accordance with Topic 805, this acquisition was accounted for as a business combination. We believe the acquisition increases our position in the data protection, threat management, email security and compliance solutions spaces.

The results of operations of Zix have been consolidated with those of OpenText beginning December 23, 2021.

Purchase Price Allocation

The recognized amounts of identifiable assets acquired, and liabilities assumed, based on their preliminary fair values as of December 23, 2021, are set forth below:


Current assets (inclusive of cash acquired of $38.3 million)	$	71,527
Non-current tangible assets	13,450
Intangible customer assets	212,400
Intangible technology assets	92,650
Liabilities assumed	(81,476)
Total identifiable net assets	308,551
Goodwill	585,910
Net assets acquired	$	894,461

The goodwill of $585.9 million is primarily attributable to the synergies expected to arise after the acquisition. There is $103.7 million of goodwill that is deductible for tax purposes.

The fair value of current assets acquired includes accounts receivable with a fair value of $26.0 million. The gross amount receivable was $32.6 million, of which $6.6 million is expected to be uncollectible.

Acquisition-related costs for Zix included in “Special charges (recoveries)” in the Consolidated Financial Statements for the year ended June 30, 2023 were $0.2 million.

Pre-acquisition equity incentives of $25.3 million were replaced upon acquisition by equivalent value cash settlements to be settled in accordance with the original vesting dates, primarily over the next two years. Of these equity incentives, $8.3 million for the year ended June 30, 2023 were included in “Special charges (recoveries).”

The finalization of the purchase price allocation during the quarter ended December 31, 2022 did not result in any significant changes to the preliminary amounts previously disclosed.

Acquisition of Bricata Inc.

On November 24, 2021, we acquired all of the equity interest in Bricata Inc. (Bricata) for $17.8 million. In accordance with Topic 805, this acquisition was accounted for as a business combination. We believe the acquisition strengthens our OpenText Security and Protection Cloud with Network Detection and Response technologies.

The results of operations of Bricata have been consolidated with those of OpenText beginning November 24, 2021.