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Micro Focus abandons private equity takeover talks

Cobol firm had seen shares rally on back of HP-Autonomy acquisition

Micro Focus, the Berkshire-based software firm with customers including Tesco and HSBC, has walked away from takeover talks with private equity firms.

The company, which sells software and services to support the mature Cobol programming language used on mainframes, also offers services for Java and .Net environments. It has carved out a strong niche in the banking industry, among others.

Its decision to abandon the negotiations was prompted by offers coming in below expectations, partly as a result of the current stock market conditions. It said that the company to approach it most recently, Advent International, had withdrawn from talks due to "current market volatility".

Four months ago, Micro Focus had been approached by another private equity firm, Bain Capital. There had been rumours at the time that any acquirer was likely to pay around £900 million for the company.

The company's stock rallied on Friday after news broke that fellow UK firm Autonomy had received a takeover offer from HP at a significant 79 percent premium to its stock market value. After Micro Focus today called off talks with all potential bidders, it saw its shares fall four percent in early trading. The company will now restart a share buyback programme.

With a customer list including Tesco, Avis car hire, Co-Operative Financial Services, HSBC and several local councils, the company was seen as a solid player. But questions had also been raised over its future growth, as the Cobol programming language is an increasingly dated platform.

When Advent pulled out of the talks, Micro Focus was quick to point out that the private equity firm "remains great admirers of Micro Focus, its management and employees".

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