Micro Focus shares ‘illogically’ slump as HP deal approaches

Micro Focus’s executive chair has dismissed a drop in the technology company’s shares as investors apprehensively approached its enormous takeover of Hewlett Packard’s software group.

The FTSE 100 group’s share value fell by 8.1 percent despite its full-year returns being in line with market prospects, with shareholders teetering ahead of the £6.8bn purchase of HP Enterprise Software, a wing of the US tech giant.

The investment is due to go through on September 1 – it will be one of Britain’s largest technology transactions, with the HP business valuing for more than half of the merged company’s profits.

Shares have plunged in recent weeks amid slower-than-expected dealing at HPE Software and before of an anticipated sell-off as American funds that do not have foreign shares sell their current stakes.

On Wednesday it dropped further after the organisation reported like-for-like incomes slipping by 0.9 percent to $1.4bn and pre-tax earnings growing insignificantly to $196.3m. While they were in route with expectations investors took the decisions as a chance not to keep shares.

Kevin Loosemore, Micro Focus’s executive chairman who supervised the HP deal, announced there was “no logical reason” for the decline in the share price, and clarified that shares had grown from £1.30 when it floated in 2005 to £20 today, a more than 1400% increase.

He stated analysts that are insinuating that management had taken their eye off in the day-to-day operation of the corporation as they act on integrating the HP business “don’t have a clue what they’re talking about” and declared there was a “general buzz” about the firm.

In September Micro Focus accepted to obtain the software division of HP Enterprise, one of the two groups created when Hewlett Packard divided in 2015. The firm contains several of the assets owned by Autonomy before HP bought the British tech firm in 2011.

When the purchase is finished, HP Enterprise shareholders will own 51 percent of the merged company but several are assumed to sell them either because of US rules or to cash in on the transaction. Mr Loosemore announced Micro Focus chiefs had talked to all of HP Enterprise’s significant shareholders. “We’ve been explaining what we do, most of them understand the model, I think what we do quite appeals to them,” he said.

Employment cuts at HPE Software are seen once the deal concludes. Mr Loosemore stated that the company was discussing to unions in Germany and France, which have strict labour laws, ahead of performing any cuts.