OpenText to Buy Zix Corporation for $860M

OpenText (OTEX) announced Monday an agreement to acquire Zix Corporation. OpenText is a Canadian company specializing in digital document management and data exchange. Zix specializes in SaaS-based email security, threat protection and compliance cloud solutions for small and medium businesses.

The transaction is valued at $860 million including debt. OpenText will pay $8.50 per share in cash for the company, a 2.7% discount from Friday’s closing price of $8.74.

OpenText CEO and CTO Mark J. Barrenechea said, “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.

“Acquisitions of cloud growth assets like Zix highlights our commitment to our Total Growth strategy and approach to cash-based returns. Zix will deepen our technology and go-to-market relationship with Microsoft.”

Barrenechea added that Zix makes a significant addition to the company’s cloud revenues and will be immediately accretive to its adjusted EBITDA.

Zix is expected to contribute to cloud organic growth and annual recurring revenue, be on the OpenText operating model for profitability, and meet the company’s cash return criteria. (See Insiders’ Hot Stocks on TipRanks)

On November 5, BMO Capital analyst Thanos Moschopoulos reiterated a Buy rating on OTEX with a price target of $58.00 (C$72.20). This implies 11.4% upside potential.

Overall, consensus on the Street is that OTEX is a Moderate Buy, based on one Buy and one Hold. The average Open Text price target of C$72.20 implies upside potential of 11.4% to current levels.

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