ACQUISITIONS AND DIVESTITURES

9 Months Ended

Mar. 31, 2024

Business Combination and Asset Acquisition [Abstract]

Fiscal 2024 Acquisitions

Other Acquisition

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.

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 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.

Purchase Price Allocation

As of March 31, 2024, 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 allowances 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 nine months ended March 31, 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 Condensed Consolidated Balance Sheets as of June 30, 2023.

The finalization of the purchase price allocation during the three months ended March 31, 2024 did not result in any significant changes to the preliminary amounts previously disclosed.

The unaudited pro forma revenues and net income (loss) of the combined entity for the three and nine months ended March 31, 2023, 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		2023
Revenues	$	1,456,893	$	4,442,276
Net income (loss) (1)	(1,302)		(453,839)
Net income (loss) attributable to OpenText (1)	(1,359)		(453,977)

______________________

(1)Included in the pro forma net loss for the three and nine months ended March 31, 2023, is a $448.2 million goodwill impairment 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 informational 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 2024 Divestiture

Divestiture of AMC Business

On May 1, 2024, the Company completed the previously announced sale of its AMC business to Rocket Software for $2.275 billion in cash before taxes, fees and other adjustments. For the three and nine months ended March 31, 2024, the results of the AMC business were recorded and presented within our Condensed Consolidated Financial Statements. See Note 25 “Subsequent Events” for more details.

As of March 31, 2024, the Company determined that the assets and liabilities of the AMC business met the criteria for held for sale classification and the respective assets and liabilities have been reclassified to Assets held for sale and Liabilities held for sale reported in our Condensed Consolidated Balance Sheets. The Company has determined that the AMC business does 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 does not meet the discontinued

operations criteria, and the results of operations from the AMC business are presented within Income from operations in our Condensed Consolidated Statements of Income. The Company expects that the sale proceeds less costs to sell will exceed the carrying value of the net assets for the AMC business. The carrying value is subject to change based on developments leading up to the closing date.

The following are classified as held for sale in the Condensed Consolidated Balance Sheets, which are related to the AMC Divestiture. The following balances incorporate the use of management estimates and are subject to change based on developments leading up to the closing date of the transaction. Refer to Note 1 “Basis of Presentation.”


	As of March 31, 2024
Assets held for sale
Accounts receivable trade, net of allowance for credit losses	$	68,767
Contract assets	5,514
Prepaid expenses and other current assets	1,882
Property and equipment	992
Operating lease right of use assets	3,431
Long-term contract assets	2,880
Goodwill	1,102,367
Acquired intangible assets	930,712
Other assets	3,766
Total Assets held for sale	$	2,120,311

Liabilities held for sale
Accounts payable and accrued liabilities	$	18,865
Operating lease liabilities	2,057
Deferred revenues	176,862
Long-term accrued liabilities	2,069
Pension liability, net	2,393
Long-term operating lease liabilities	1,402
Long-term deferred revenues	24,458
Total Liabilities held for sale	$	228,106

The Company presents its deferred tax assets and liabilities related to transactions structured as share sales within Deferred tax assets and Deferred tax liabilities in our Condensed Consolidated Balance Sheets instead of presenting them as Assets held for sale or Liabilities held for sale in accordance with our accounting policies. The deferred tax liability associated with the share sale entities related to the AMC Divestiture, which was not presented as part of Liabilities held for sale, was $113.3 million as of March 31, 2024.