Enterprise software company Micro Focus is to sell its archiving and risk management business to a US firm.

The Newbury-headquartered company, listed both in London and New York, agreed a $375 million deal with Smarsh, payable in full on completion of the transaction. 

Completion is expected to occur in the first quarter of 2022.

The Digital Safe business forms part of the Information Management and Governance (IM&G) Product Group and includes Digital Safe products and the complementary offerings of Social Media Governance, Supervisor and eDiscovery.

Stephen Murdoch, Micro Focus CEO, said: “Micro Focus acquired the Digital Safe business in September 2017 as part of the HPE transaction. Since this date, we are proud of the progress made, with our focus on customer-centric innovation delivering significant improvements to the portfolio and enabling us to begin the transition to a cloud-first business model.

“Looking ahead, archiving and risk management is changing rapidly and becoming an increasingly specialised area. We believe that by combining the Digital Safe business with Smarsh, a leading innovator in this area, our Digital Safe customers and employees will see significant benefits and be better served for the long term.”

Don’t sell your business too early

In FY21, the Digital Safe business is expected to generate approximately $109m of revenue, a decline of approximately 11% at constant currency compared to the prior year. 

The business is expected to contribute $30m of adjusted EBITDA less cash costs associated with lease payments in FY21.

As at 30th April 2021, the total gross assets of the Digital Safe business were approximately $373m and net assets were approximately $277m, including lease obligations totalling $43m. 

Brian Cramer, Smarsh CEO, added: “Smarsh focuses its efforts on meeting the sophisticated risk, compliance and e-discovery needs of regulated industries. 

“We see significant opportunity in helping our existing, mutual and future customers to extend the value of their retention and oversight technology investments and to facilitate communications data strategies that will meet the challenges of tomorrow. 

“Upon completion of the transaction, we’ll work together with our new expanded team to deliver this vision to our customers.”

Micro Focus said the transfer of the lease obligations will reduce the group’s net debt.