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ACQUISITIONS AND DIVESTITURES | 12 Months Ended
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Jun. 30, 2024
Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract] |
ACQUISITIONS AND DIVESTITURES | ACQUISITIONS AND DIVESTITURES Fiscal 2024 Divestitures Divestiture of AMC Business On May 1, 2024, the Company completed the sale of its AMC business to Rocket Software for $2.275 billion in cash before taxes, fees and other adjustments. The results of the AMC business were recorded and presented within our Consolidated Financial Statements during Fiscal 2024 for the period of July 1, 2023 through April 30, 2024. In connection with the sale, a gain of $429.1 million was recorded in Other income (expense), net within the Company’s Consolidated Statements of Comprehensive Income for the year ended June 30, 2024. The Company determined that the AMC business did not constitute a component, as its operations and cash flows cannot be clearly distinguished from the rest of the Company’s operations and cash flows due to significant shared costs, therefore, the transaction did not meet the discontinued operations criteria, and the results of operations from the AMC business are presented within Income from operations in our Consolidated Statements of Income. The Company used the net proceeds from the transaction to prepay in full the outstanding principal balances of the Term Loan B and prepay a portion of the outstanding principal balance of the Acquisition Term Loan, as further described in Note 11 “Long-Term Debt.” The Company has also agreed to provide certain transition services to Rocket Software following completion of the divestiture for up to 24 months, which are included in financing activities on the Consolidated Statements of Cash Flows. These transition service costs are reimbursable by Rocket Software. For Fiscal 2024, we billed Rocket Software $11.5 million under the TSA. The following table presents the carrying amounts of major classes of assets and liabilities disposed of in the AMC Divestiture as of April 30, 2024:
AMC Assets |
Accounts receivable trade, net of allowance for credit losses | $ | 57,927 |
Contract assets | 10,355 |
Prepaid expenses and other current assets | 4,651 |
Property and equipment | 1,091 |
Goodwill | 1,139,403 |
Acquired intangible assets | 930,771 |
Deferred tax assets | 2,820 |
Other assets | 1,502 |
Total AMC Assets | $ | 2,148,520 |
AMC Liabilities |
Accounts payable and accrued liabilities | $ | 11,166 |
Deferred revenues | 188,648 |
Long-term accrued liabilities | 8,128 |
Pension liability, net | 1,640 |
Long-term operating lease liabilities | 672 |
Long-term deferred revenues | 23,623 |
Long-term income taxes payable | 9,845 |
Deferred tax liabilities | 116,086 |
Total AMC Liabilities | $ | 359,808 |
Fiscal 2024 Acquisitions Other Acquisitions On August 23, 2023, we acquired all of the equity interest in KineMatik Ltd. (KineMatik), a provider of automated business process and project management solutions built on OpenText’s Content Server. In accordance with ASC Topic 805, “Business Combinations”, this acquisition was accounted for as a business combination. The results of operations of KineMatik have been consolidated with those of OpenText beginning August 24, 2023. The results of KineMatik are not considered to be material to our business. On May 22, 2024, we acquired Pillr, a cloud native, multi-tenant Managed Detection and Response (MDR) platform from Novacoast, Inc. for Managed Service Providers (MSPs) that includes powerful threat-hunting capabilities. In accordance with ASC Topic 805, “Business Combinations”, this acquisition was accounted for as a business combination. The results of operations of Pillr have been consolidated with those of OpenText beginning May 22, 2024. The results of Pillr are not considered to be material to our business. 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. The results of operations of Micro Focus have been consolidated with those of OpenText with effect from February 1, 2023. 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 billion in aggregate principal amount of 6.90% Senior Secured Notes 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. 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 | $ | 541,584 |
Accounts receivable, net of allowance for credit losses (1) | 408,921 |
Other current assets (3) | 288,842 |
Non-current tangible assets | 441,129 |
Goodwill (2) (3) | 3,385,572 |
Intangible customer assets | 2,162,400 |
Intangible technology assets | 1,392,300 |
Accounts payable and accrued liabilities | (473,635) |
Deferred revenues | (1,107,627) |
Other liabilities (3) | (793,049) |
Net Assets Acquired | $ | 6,246,437 |
______________________ (1)The gross amount receivable was $418.2 million of which $9.3 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. (3)Current period purchase price allocation adjustments of $32.1 million for the year ended June 30, 2024, were primarily driven by changes in other current assets and other liabilities related to adjustments of pre-acquisition other current assets and deferred tax liabilities. 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 received final court approval and is now resolved, was fully paid from insurance coverage, and therefore a receivable was 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. Acquisition-related costs for Micro Focus included in Special charges (recoveries) in the Consolidated Statements of Income for the year ended June 30, 2024 were $1.1 million (year ended June 30, 2023 and 2022—$48.3 million and nil. The finalization of the purchase price allocation during the quarter ended March 31, 2024 did not result in any significant changes to the preliminary amounts previously disclosed. 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) |
______________________ (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 |
______________________ (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 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 Statements of Income 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. 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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