GXS Group is a cloud service provider that specializes in online transactions and supply chain management. Open Text is a Canadian company that specializes in Enterprise Information Management. Open Text services clients such as Microsoft and Oracle. The marriage between GXS and Open Text seems to make sense. As the need for cloud computing expands, document and work flow management coupled with the perks that GXS brings to the table helps keep Open Text competitive and ahead of the curve. GXS currently has about 40,000 customers.
On the business side of this deal, Open Text would pay GXS nearly a billion in cash and the remainder of the balance would be paid in company stock. This deal is unique because Open Text paid a premium to buy GXS. GXS’s fiscal 2012 revenue was $487 million meaning that Open Text paid 2.4 times that for the company. Open Text paid about $200 million of the purchase price with cash on hand. Open Text received financing in excess of $800 Million in order to close the deal from Barclays and RBC. GXS retained the services of J.P. Morgan while Open Text retained the services of CitiGroup Global Markets in efforts to perform due diligence and the likes.
Current GXS shareholders will walk away from the deal owning between 2.1 and 2.4 percent of the common shares available for Open Text according to Reuters. The deal is expected to close within 90 days. The stock price for Open Text has risen by 39% year to date. Open Text is based in Waterloo, Ontario and has a market capitalization of $4.4 billion. Other than a PR release, neither company has made an official announcement regarding the acquisition. Open Text expects the acquisition of GXS to expand their market capitalization even further by delivering their products using GXS’s private cloud.