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ACQUISITIONS | 9 Months Ended
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Mar. 31, 2023
Business Combination and Asset Acquisition [Abstract] |
ACQUISITIONS | ACQUISITIONS 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:
Current assets (inclusive of cash acquired of $542.2 million) | $ | 1,231,719 |
Non-current tangible assets | 440,771 |
Intangible customer assets | 2,117,600 |
Intangible technology assets | 1,380,600 |
Liabilities assumed | (2,430,783) |
Total identifiable net assets | 2,739,907 |
Goodwill | 3,507,075 |
Net assets acquired | $ | 6,246,982 |
The goodwill of $3.5 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. The fair value of current assets acquired includes accounts receivable with a fair value of $398.3 million. The gross amount receivable was $409.1 million of which $10.8 million of this receivable was expected to be uncollectible. Acquisition-related costs for Micro Focus included in “Special Charges (Recoveries)” in the Condensed Consolidated Financial Statements for the three and nine months ended March 31, 2023 were $34.8 million and $45.1 million, respectively. 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 is subject to final court approval, 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 Condensed Consolidated Balance Sheets as of March 31, 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 Condensed Consolidated Statements of Income for the three and nine months ended March 31, 2023 is set forth below:
| February 1, 2023 – March 31, 2023
Revenues | $ | 374,414 |
Net Loss (1) | $ | (29,795) |
______________________ (1)Net loss for the three and nine months ended includes one-time fees of approximately $39.9 million, respectively, on account of special charges and $43.6 million, respectively, of amortization charges relating to intangible assets. The unaudited pro forma revenues and net income of the combined entity for the three and nine months ended March 31, 2023 and 2022, respectively, had the Micro Focus Acquisition been consummated on July 1, 2021, are set forth below:
| Three Months Ended March 31, |  | Nine Months Ended March 31,
Supplemental Unaudited Pro Forma Information | 2023 |  | 2022 |  | 2023 |  | 2022
Revenues | $ | 1,456,893 |  |  | $ | 1,480,505 |  |  | $ | 4,442,276 |  |  | $ | 4,729,591 |
Net income (loss) (1) | (853) |  |  | (44,366) |  |  | (450,690) |  |  | 105,286 |
Net income (loss) attributable to OpenText (1) | (910) |  |  | (44,407) |  |  | (450,828) |  |  | 105,156 |
______________________ (1)Included in the pro forma net loss for the nine months ended March 31, 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, a leader in software as a service (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 March 31, 2022. In accordance with Accounting Standards Codification (ASC) Topic 805 “Business Combinations” (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 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 Condensed Consolidated Financial Statements for the three and nine months ended March 31, 2023 were nil and $0.2 million, respectively. Pre-acquisition equity incentives of $25.8 million were replaced upon acquisition by equivalent value cash settlements to be settled in accordance with the original vesting dates, primarily over the two years after the date of the acquisition. Of these equity incentives, $0.8 million and $8.0 million, respectively, for the three and nine months ended March 31, 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.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI https://asc.fasb.org/topic&trid=2303972 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 5 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=128092470&loc=d3e4946-128472 + Details
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