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OpenText To Buy Zix For $860 Million To Create ‘Powerhouse SMB’ Platform; Boost Microsoft Partnership

“Zix will deepen our technology and go-to-market relationship with Microsoft. Further, Zix will bring approximately 5,600 MSPs to OpenText, and create significant cross-sell opportunities in the OpenText and Zix clouds,” said OpenText CEO Mark Barrenechea.

OpenText will create a new “powerhouse” small-medium business (SMB) market leading platform through a $860 million deal to acquire Zix, announced today, while also boosting its partnership with Microsoft, said OpenText CEO and CTO Mark Barrenechea.

“We intend to integrate Carbonite, Webroot and Zix products to create a powerhouse SMB platform for data protection, threat management, email security and compliance solutions,” Barrenechea said in a statement. “Acquisitions of cloud growth assets like Zix highlights our commitment to our total growth strategy and approach to cash-based returns.”

With OpenText’s acquisition of Carbonite—which had previously acquired endpoint security provider Webroot—and the upcoming purchase of Zix, OpenText will now be able to offer customers both endpoint and email security.

[Related: It’s Official: McAfee To Go Private In $14B Deal]

Additionally, Barrenechea said the acquisition of Zix, a developer of email encryption software, will boost OpenText’s partnership with software kingpin Microsoft and vastly expand its channel partner footprint.

“Zix will deepen our technology and go-to-market relationship with Microsoft. Further, Zix will bring approximately 5,600 MSPs to OpenText, and create significant cross-sell opportunities in the OpenText and Zix clouds,” said Barrenechea. “Today‘s announcement demonstrates our commitment to winning in both the Enterprise and SMB markets.”

Zix last year expanded its product suite into Microsoft Office 365 backup with the purchase of cloud-based data backup and recovery provider CloudAlly. Buying Israel-based CloudAlly for $30 million has helped Zix customers safeguard Office 365, Google Workspace, SharePoint, OneDrive, Salesforce, Dropbox and Box with backup and recovery from any point in time with unlimited data retention.

Additionally, Zix moved into the MSP market with its $275 million purchase of email and web security stalwart AppRiver in January 2019. The company’s revenue for the 2020 calendar year surged to $218.5 million, up 26 percent from $173.4 million in 2019 due primarily to the AppRiver acquisition.

OpenText’s chief financial officer and executive vice president, Madhu Ranganathan, said his company’s acquisition of Carbonite in late 2019 and its successful integration gave OpenText the “confidence and readiness to expand even further into the SMB market.”

“Zix brings a meaningful addition to our cloud revenues and will be immediately accretive to our adjusted EBITDA. Once integrated, we expect Zix to contribute to organic growth in cloud and Annual Recurring Revenues, be on the OpenText operating model for profitability and meet our cash-based returns criteria,” Ranganathan said in a statement.

OpenText acquisition of Zix is expected to close within the next 90 days.

OpenText’s stock is trading at $51.64 per share today, up less than 1 percent. Zix’s stock is down nearly 3 percent today, trading at $8.50 per share.

The deal is for all outstanding Zix common stock - including shares of common stock issued upon conversion of Zix’s Series A Preferred Stock - for $8.50 per share in cash. The total purchase price is $860 million, inclusive of Zix’s cash and debt.

Zix has a market valuation of $483 million and competes against larger email security vendors such as Mimecast and Proofpoint, the latter of which was sold to private equity firm Thoma Bravo in August for $12.3 billion.

OpenText’s acquisition news of Zix comes the same day as security superstar McAfee unveils plans to be acquired by a group of private equity and investment firms for $14 billion.

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