Proposed Merger of
Micro Focus International PLC With
The Attachmate Group, Inc.
Presentation to Analysts and Shareholders
Kevin Loosemore
Mike Phillips
15th September 2014
Safe Harbour Statement
• The following presentation is being made only to, and is only directed at, persons to whom such presentation may lawfully be communicated
(“relevant persons”). Any person who is not a relevant person should not act or rely on this presentation or any of its contents. Information in the
following presentation relating to the price at which relevant investments have been bought or sold in the past or the yield on such investments
cannot be relied upon as a guide to the future performance of such investments.
• This presentation does not constitute an offering of securities or otherwise constitute an invitation or inducement to any person to underwrite,
subscribe for or otherwise acquire securities in Micro Focus International plc (the “Company”) or any company within the Micro Focus Group.
• The release, publication or distribution or this presentation in certain jurisdictions may be restricted by law, and therefore persons in such
jurisdictions into which this presentation is released, published or distributed should inform themselves about, and observe, such restrictions.
• Certain statements contained in this presentation constitute forward-looking statements. All statements other than statements of historical facts
included in this presentation, including, without limitation, those regarding the Company’s financial condition, business strategy, plans and
objectives, are forward-looking statements. These forward-looking statements can be identified by the use of forward-looking terminology,
including the terms “believes”, “estimates”, “anticipates”, “expects”, “intends”, “may”, “will”, or “should” or, in each case, their negative or other
variations or comparable terminology. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which
may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous
assumptions regarding the Company’s present and future business strategies and the environment in which the Company will operate in the
future. Such risks, uncertainties and other factors include, among others: the level of expenditure committed to development and deployment
applications by organisations; the level of deployment-related turnover expected by the Company; the degree to which organisations adopt webenabled services; the rate at which large organisations migrate applications from the mainframe environment; the continued use and necessity of
the mainframe for business critical applications; the degree of competition faced by the Company; growth in the information technology services
market; general economic and business conditions, particularly in the United States; changes in technology and competition; and the Company’s
ability to attract and retain qualified personnel. These forward-looking statements speak only as at the date of this presentation. Except as required
by the Financial Conduct Authority, or by law, the Company does not undertake any obligation to update or revise publicly any forward-looking
statement, whether as a result of new information, future events, or otherwise.
Micro Focus – a Case Study in Sustainable Shareholder Returns
• Delivering shareholder returns of between 15% – 20% per annum
• FY2006 to FY2014 Compound Annual Growth Rates
– Diluted Earnings Per Share
– Adjusted Diluted Earnings Per Share
– Dividend Per Share
33.5%
27.7%
28.3%
3
Agenda
Executive Summary
Annex A: Product Portfolio
Annex B: Financial Overview
Annex C: Integration
4
Transaction Summary: Overview
• Merger of private equity owned The Attachmate Group, Inc. (‘Attachmate Inc.’) with Micro Focus International PLC (‘Micro
Focus’), classified as a Reverse takeover by the UKLA
Proposed
Transaction
• Micro Focus shareholders will own 60% of the listed shares in the Enlarged Group
• The current Attachmate Inc. shareholders and management will own the remaining 40% of shares
• Proposed Return Of Value (‘RoV’) of 60 pence per share will be paid only to existing Micro Focus shareholders.
• FY14 revenues* for Attachmate Inc. and its subsidiaries (“Attachmate Group”) were $957m and Adjusted EBITDA of $308m
(Underlying Adjusted EBITDA of $313m), generated by ~3,300 employees across 36 countries
What Is Being
Acquired?
• Attachmate Group has four product portfolios (FY14 revenues*):
- SUSE ($197m), which provides Linux Software Server Operating Systems;
- NetIQ ($289m), which provides software for Identity Access Management and Security;
- Attachmate ($186m), which provides software for Terminal Emulation and Host Connectivity; and
- Novell ($285m), which provides software for Collaboration, End Point Management and File & Network Services
• On a Pro forma** basis, the Enlarged Group would have had FY14 revenues of $1,390m, Adjusted EBITDA of $500m and
underlying Adjusted EBITDA of $509m, prior to the delivery of any operational efficiencies, along with ~4,500 employees
- The combined group’s entry net leverage will be 3.3x Facility EBITDA, targeted to reduce to < 2.5x within two years
Financial Impact
• The deal is expected to be accretive to adjusted earnings per share for FY15 and beyond****
• Attachmate Group is being acquired*** for 7.5x Enterprise Value/FY14 Underlying Adjusted EBITDA, a substantial discount to
Micro Focus’s multiple
Timetable
• Deal completion is targeted for November 3rd, 2014, subject to: 1) shareholder approval; 2) competition clearance, 3)
refinancing of current debt facilities, and 4) completion of the conditions precedent that are set out in the Merger Agreement
* Financial numbers for Attachmate Group are under IFRS for year ending March 31st 2014
** Pro-forma combination numbers are stated under IFRS for year ended April 30th 2014 for Micro Focus and March 31st 2014 for Attachmate Group
*** Assumes share price is 842.5p at close on 12th September 2014 and $:£ exchange rate of $1.6229:£1, excludes fees & expenses of $168.0m
**** This statement is not intended to be a profit forecast, and should not be interpreted to mean that the earnings per share of the Micro Focus Group following completion of the Merger will
necessarily be above or below historical published earnings per share.
5
Group Strategy: Unchanged
Messaging
Implications
• Micro Focus helps bridge the old and the new by enabling
you to:
- Exploit advances in technology such as virtualization,
cloud and mobile without the cost and risk of starting
again with the application suite
- Protect prior investments in your data and business logic
whilst unlocking new opportunities & use cases
- Optimize where you build, test and deploy business
applications
- Execute with a balance of speed, flexibility and risk, that
is right for your business
• Our execution needs to ensure we:
- Identify opportunities to exploit new models and market
niches
- Focus on “sticky” products which are embedded within
customers’ systems and processes
- Develop product capabilities & services that encourage
and promote use of current product over the decision to
move
- Acquire assets that add capabilities that incentivize
customers to remain with their current products, or add
further similar types of product and customer sets
Operational Outputs
• Focus on EBITDA and FCF growth
• Focus on Total Shareholder Returns
• Maintain a stable platform to deliver sustainable results
Attachmate Group Merger Consistent With This Strategy
6
Attachmate Inc.’s Timeline
2011
2006
2012
2013
Event
Division
2005
Private equity
consortium
bought
Attachmate &
combined with
WRQ
(acquired in
2004) to
consolidate
industry
segment
NASDAQ
listed NetIQ
acquired in
2006
Novell
acquired in
2011
The SUSE
division had
been bought
by Novell in
2003
NetIQ named a Novell launches
leader in Gartner
Filr, an onMagic Quadrant premise cloud file
for User
storage solution
Administration
for enterprise
and Provisioning
SUSE releases
first OpenStackbased enterprise
private cloud
solution
Founded in 1984 in Seattle, the Company has pursued acquisitive as well as organic growth
7
Background to Wizard
• Wizard, the ultimate holding company of Attachmate Inc., is owned by Golden Gate Private Equity,
Inc., Francisco Partners Management, L.P., Elliot Management, Thoma Bravo and senior
management of the Attachmate Group. Key economic interest in Wizard:– Golden Gate Capital
31.52%
– Francisco Partners
29.92%
– Thoma Bravo
14.14%
– Elliot Management Corporation
13.17%
– Management and others
11.25%
• Following completion, Wizard will own 40% of the enlarged group (38.23% if the Return of Value is
not approved)
• On completion, Wizard will enter into a relationship agreement with the Company which:
– regulates the continuing relationship with the Company, whilst Wizard holds in excess of 10% of the
enlarged group
– allows Wizard to appoint 2 NEDs, whilst Wizard holds in excess of 30% (and 1 NED whilst Wizard holds
between 30 and 15%)
– contains a customary lock-up for 365 days
• Following the IPO of Micro Focus in May 2005, Golden Gate Capital owned 60.5% of Micro Focus
and remained a shareholder until it completed its divestment in February 2009
8
Board composition
• On Completion, Prescott Ashe (Managing Director of Golden Gate Capital) and David Golob
(Partner at Francisco Partners) will join the Board as Non-Executive Directors
• To ensure an appropriate balance between Independent and Non-Independent Directors, Stephen
Murdoch will step down from the Board whilst remaining as a key member of the operating board
• The remaining Directors (other than David Maloney, retiring at September AGM as previously
announced) will continue to perform their existing roles on the Board as part of the enlarged group:
Kevin Loosemore
Executive Chairman
Karen Slatford
Independent NED
Mike Phillips
CFO
Tom Virden
Independent NED
Prescott Ashe
Non-Independent NED
Richard Atkins
Independent NED
David Golob
Non-Independent NED
Tom Skelton
Independent NED
• Another independent Non-Executive Director to be appointed to the Board following Completion
so that the Board will have a majority of Independent Directors
9
Implementation: Management team
The management team has a long track record of driving shareholder returns
Combined Micro Focus and Attachmate Group
Kevin Loosemore
Executive
Chairman
Kevin was previously Chairman of Morse plc, a
director of Nationwide Building Society and the Big
Food Group plc. His most recent executive roles
were as COO of Cable & Wireless plc, President of
Motorola Europe, Middle East and Africa and before
that, he was CEO of IBM UK. Kevin was appointed
non-executive Chairman of the Company in 2005
and Executive Chairman in April 2011.
Stephen Murdoch
Chief Operating
Officer, Micro
Focus
As COO, Stephen is responsible for the day to day
execution of Micro Focus operations. Stephen has a
25 year track record of success in the IT industry.
Most recently, Stephen was the General Manager of
EMEA for Dell’s Public Sector and Large Commercial
Enterprise business unit. Stephen joined Micro Focus
in November 2012 as General Manager of Products
and Marketing Strategy.
Nils Brauckmann
President and
General Manager,
SUSE
Nils runs the SUSE business unit and has over 20
years of experience in the IT industry. He first joined
WRQ in 1994 (acquired by Attachmate Inc. in 2004)
and has held various management roles across the
Attachmate Group sales, marketing and support
organizations in EMEA.
Jay Gardner
President and
General Manager,
NetIQ
Jay leads the NetIQ Business Unit and brings over
30 years of experience in sales, marketing, business
development and technology strategy to the
organization. He is also an 18-year BMC Software
veteran, where he served in a variety of positions,
including vice president and general manager of
the BMC On-Demand business unit and CIO.
Mike Phillips
Chief Financial
Officer
Mike joined Micro Focus in September 2010 and was
previously CEO at Morse plc, following his initial role
as Group Finance Director. From 1998 to 2007, Mike
was Group Finance Director at Microgen plc. Earlier
roles include seven years corporate finance work at
Smith & Williamson, as well as two years at PwC
where he led the UK technology team.
Charles Sansbury
Chief Operating
Officer, Attachmate
Group
Charles oversees worldwide finance and operations
for the Attachmate Group. He brings more than 16
years of experience in strategic, financial and
operational leadership. Previously, Charles served as
SVP of corporate development, then CFO for Vignette
Corporation. Before Vignette, Charles was a Principal
in the Investment Banking Group at Morgan Stanley.
Kathleen Owens
President and
General Manager,
Attachmate and
Novell
As President and General Manager of the Attachmate
and Novell Business Units, Kathleen draws on more
than 14 years leadership experience. Previously
Kathleen was vice president of sales for Attachmate
Group. North America. She began her Attachmate
Group. career in regional and international sales and
also served as territory manager and sales director.
10
Managing the Business According to the Product Life Cycle
Portfolio positioning and approach
Growth Markets
Change
trajectory
Targeted Investment
‘Me too’
models
Reduce
rates of
decline
Opportunity Identification
New
models
Introduction
Growth
Maturity
Optimize Returns
11
Decline
Existing & Acquired Products Will Be Managed As a Portfolio
Managing our business through a structured approach to product
NEW MODELS
GROWTH DRIVERS
(subscription, cloud)
(build the future)
NICHE
CORE
(optimise returns)
(protect)
12
Micro Focus Product Summary
Portfolio of both mature and growth products
COBOL
Development
FY 2014
Revenue
Mainframe
Solutions
Borland
CORBA
Niche
Total Micro
Focus
License
$108M
$29M
$19M
$19M
$3M
$178M
Maintenance
$123M
$42M
$42M
$27M
$10M
$243M
$1M
$6M
$4M
$1M
$0M
$12M
$232M
$77M
$65M
$47M
$12M
$433M
-1%
3%
9%
82%
-34%
5%
COBOL
Off-Mainframe
Development
COBOL
Mainframe
Modernization
Application
Development &
Testing Tools
CORBA
Middleware
Solutions
Various
Market Rank
Top 3
Top 3
Top 10
Top 3
N/A
Key Competitors
IBM
Dell
Fujitsu
IBM
HP
IBM
Microsoft
Open Source
N/A
Key Products
COBOL;
Visual COBOL
Enterprise;
Enterprise
Analyzer;
Rumba
Silk;
Caliber;
Starteam;
AccuRev
Visibroker;
Orbix;
OpenFusion;
Orbacus
Various
# Customers
6K
2K
2K
370
1K
Services
Total
Growth
Primary Market
Description
Market
Products
Mature
13
Growth
Attachmate Group Product Summary
Portfolio of both mature and growth products
Attachmate
FY 2014
Revenue
NetIQ
SUSE
Attachmate
Group
Total
License
$80M
$38M
$75M
N/A
$192M
Maintenance &
Subscription
$100M
$229M
$171M
$182M
$682M
$6M
$19M
$44M
$15M
$83M
$186M
$285M
$289M
$197M
$957M
-8%
-12%
1%
9%
-4%
Host Connectivity
Collaboration;
File & Networking;
Endpoint Mgmt
Identity & Security
Management
Linux
Top 3
Top 10
Top 10
Top 3
IBM
Rocket Software
Microsoft
Citrix
Box
EMC
CA Technologies
IBM
Red Hat
Oracle
Unpaid Linux
Key Products
Reflection;
INFOConnect;
Verastream;
DATABridge
OES;
ZENworks;
GroupWise
NetIQ App Manager;
Net IQ Security Manager
SUSE Linux Enterprise
Server;
SUSE Mobile
# Customers
4K
8K
5K
15K
Services
Total
Growth
Primary Market
Description
Market
Novell
Market Rank
Key Competitors
Products
Mature
14
Growth
Deal Logic: Products Acquired Increase Micro Focus’s Capabilities
Capability to bridge the old and the
new in all areas across heterogeneous,
complex IT environments…
DEVELOP
Application
Development
Tools
MODERNIZE
Mainframe
Code
Modernization
EXTEND
Host
Connectivity
TEST
SECURE
Testing
Tools
Identity and
Security
Mgmt
CONTROL
System and
Resource
Mgmt
MANAGE
Network
Operating
Platform
OPERATE
Operating
System
Micro Focus




Attachmate Group








Visual
COBOL
Enterprise
Application
Modernisation
Rumba
Silk
NetIQ App
Manager
Platespin
Netware
SUSE Linux
Enterprise Server
SUSE Studio
Verastream
Reflection
Caliber
NetIQ Security
Manager
Zenworks
OES
SUSE Mobile
Extra!
StarTeam
Identity Manager
INFOConnect
Vivinet
Access Manager
AccuRev
SecureLogin
Key Products
Groupwise
Sentinel
Enabling customers to leverage prior investments AND exploit the latest industry innovation
15
The Numbers: Revenue* by Product Portfolio
* Under IFRS
Micro Focus
Attachmate Group
Revenue
Revenue
CAGR
500
$433M
$435M
$412M
37
12
26
19
26
47
68
59
65
CAGR
1,250
'12-'14
'12-'14
-0.2%
-2.8%
$1,013M
-42.7%
$996M
$957M
1,000
34.1%
164
180
197
-1.8%
9.4%
750
250
78
75
77
290
-0.5%
288
289
-0.2%
500
350
Niche
SUSE
226
CORBA
233
232
1.1%
NetIQ
Borland
285
-9.8%
186
-5.6%
250
Novell
Mainframe
COBOL
326
208
202
FY12
FY13
Attachmate
0
0
FY12
FY13
FY14
16
FY14
The Numbers: Headcount
Average Monthly Number of Employees for FY14
5,000
4,647
4,500
598
4,000
3,428
3,500
372
1,640
3,000
2,500
1,319
2,000
1,500
1,000
1,219
2,409
226
321
1,737
500
672
0
Micro Focus
Selling & Distribution
Attachmate Group
Research & Development
17
Proforma
Administration
Revenue Segmentation
Combination has a balanced revenue profile…
Micro Focus
Asia Pacific &
Japan
13%
Asia Pacific &
Japan
10%
North
America
46%
Revenue by
Geography
Internation
al
41%
CORBA
11%
Revenue by
Product
Portfolio
Borland
15%
Mainframe
Solutions
18%
North
America
51%
Internation
al
39%
Collaboration
30%
Mainframe
Solutions
19%
COBOL
53%
LINUX
21%
Consultancy
9%
Licence
41%
Combined Group
Asia Pacific &
Japan
11%
Niche
3%
Consultancy
3%
Revenue
by Type
Attachmate Group
System/
Security
30%
Licence
20%
Subscription
19%
Maintenanc
e
56%
Internation
al
40%
CORBA
3%
Collaboration
20%
Consultancy
7%
Subscription
13%
Recurring
66%
Revenue FY14: $433m
Mainframe Solutions
19%
System/
Security
21%
LINUX
14%
Licence
27%
Maintenance
53%
Nonrecurring
30%
Nonrecurring
29%
Recurring
Revenue
Niche
1%
Borland
5%
COBOL
17%
Maintenance
52%
Nonrecurring
34%
North
America
49%
Recurring
70%
Recurring
71%
Revenue FY14: $957m
18
Revenue FY14: $1,390m
Large Base of Recurring Revenue
+
Micro Focus
Revenue
Revenue
$434M
$412M
$433M
100%
90%
90%
36%
32%
34%
Combined*
Revenue
$1,013M $996M
100%
80%
=
Attachmate Group
$957M
$1,448M
90%
29%
31%
29%
80%
80%
70%
70%
70%
60%
60%
60%
50%
50%
50%
40%
40%
30%
64%
68%
66%
71%
30%
20%
20%
20%
10%
10%
10%
0%
FY12
Recurring
FY13
FY14
Non-Recurring
32%
30%
30%
68%
70%
70%
FY12
FY13
FY14
40%
71%
69%
30%
0%
$1,408M $1,390M
100%
0%
FY12
FY13
Recurring
FY14
Non-Recurring
* Combined numbers under IFRS for year ended April 30th 2014 for Micro Focus and March 31st 2014 for Attachmate Group
19
Recurring
Non-Recurring
Diversified Customer Base…
Attachmate Group
Healthcare
Consumer/
Retail
Industrials
Financial
Services
Technology/
Telecom
Micro Focus
• 23,000+ customers including nearly 100% of Global
10,000 enterprises(2)
• 11,000+ customers including 70 of Fortune 100
companies(1)
(1) Based on customers billed within the last 18 months.
(2) Count based on customers with active maintenance. Nearly 100% of Global 10,000 enterprises have purchased products within last 5 years.
20
…with no Customer Concentration
Micro Focus
Attachmate Group
Revenue by Customer
Bookings by Customer
100%
100%
100%
100%
90%
90%
80%
80%
70%
70%
60%
60%
90%
50%
50%
40%
40%
30%
30%
20%
20%
10%
93%
10%
10%
0%
0%
FY14
Top 10
7%
FY14
Remainder
Top 10
21
Remainder
The Numbers: Combined Revenue And EBITDA
Combined Revenue
1,500
$1,448M
123
Combined Underlying Adj. EBITDA
$1,408M
$1,390M
113
95
600
1,000
$517M
$512M
344
328
313
173
184
196
FY12
FY13
FY14
$509M
400
929
936
925
500
200
Services
Athena
Attachmate
Maintenance &
Subscriptions
License
Minerva
Micro Focus
397
359
370
0
0
FY12
FY13
FY14
* Combined numbers stated under IFRS to year ended April 30th 2014 for Micro Focus and March 31st 2014 for Attachmate Group
22
Strong Free Cash Profile
Micro Focus
Attachmate Group
Cash from Operations
250
200
% Conversion
Cash from Operations
$197M
$195M
% conversion
Cash from Operations
125%
$400M
$207M
Cash from Operations
% conversion
$317M
100%
150
% Conversion
$284M
300
$255M
150%
125%
100%
75%
200
100
75%
50%
50%
50
25%
0
25%
0%
FY12
% Conversion
100
FY13
0
FY14
0%
FY12
FY13
126%
79%
103%
$323M
$277M
108%
103%
108%
% Conversion
Adj. EBITDA $182M
less exceptionals
$188M
$192M
Adj. EBITDA $251M
less exceptionals
 Both businesses operate at >30% EBITDA margins and generate significant free cash flow
 Conservative initial leverage of 3.5x gross and 3.3x net
Note: % Conversion defined as Cash from Operations divided by Adj. EBITDA less Exceptional Items; see appendix for details on Exceptional Items
23
FY14
Financing The Transaction: Sources & Uses*
Amount
$0.0
$500.0
$1,350.0
$1,850.0
Revolver undrawn
Term Loan C
Term Loan B
Total Debt
Micro Focus Rolled Equity
Attachmate Group Rolled Equity
Total Rolled Equity
$1,776.0
$1,184.0
$2,960.0
Micro Focus Cash (31 July 14)
Attachmate Group Cash (31 July 14)
Total Cash
$33.3
$128.9
$162.2
Total Sources
Micro Focus Rolled Equity
Attachmate Group Rolled Equity
Total Rolled Equity
$1,776.0
$1,184.0
$2,960.0
Retire Micro Focus Debt (31 July 14)
Retire Attachmate Group Debt (31 July 14)
Total Debt Requirement
$266.2
$1,294.6
$1,560.8
Return of Value to Micro Focus Shareholders
Fees and Expenses
Cash to B/S (Balancing figure)
$4,972.2
Rolled Equity Calculations
Micro Focus Share Price (£) - (A)
Return of Value (£) - (B)
Consolidation Ratio (=(A-B)/A)
Listed Shares (m)
Post Consolidation Shares
Attachmate 40% share of Enlarged Listed Shares
Total Listed Shares
$:£ Exchange Rate
•
Amount
8.425
0.6
92.9%
139.9
129.89
86.6
216.5
1.6229
st
$136.2
$168.0
$147.2
Total Uses
$4,972.2
Target Consideration
FY 14 Underlying Adjusted EBITDA
Number of shares to seller (m)
Share price in $
Equity Component
Net debt component
EV (excluding Fees and Expenses)
EV/Underlying Adjusted EBITDA
Fees and Expenses
$312.8
86.60
$13.7
$1,184.0
$1,165.7
$2,349.7
7.5x
$168.0
Note that the S&U calculations use the July 31 2014 balance sheet and do not include operating or financing cash flows between that date and the closing date of the transaction.
24
Indebtedness, new financing facilities and dividend
• Enlarged Group net indebtedness
- Micro Focus: $232.9m as at 31 July 2014
- Attachmate Group: $1,165.7m as at 31 July 2014
• Pro forma net leverage: 3.3x Facility EBITDA**
- Return of value: $136.2m
• Targeting 2.5x Facility EBITDA within 2 years of
completion
- Transaction fees: $168.0m*
- Aggregate net indebtedness: $1.7 billion
• Underwriting commitments have been secured in respect of the New Facilities in an aggregate amount of $2.0 billion
which comprise:
- a syndicated Senior Secured Term Loan B of $1.35 billion, amortising at 1.0% per annum, with a 7 year term;
- a syndicated Senior Secured Term Loan C of $500 million, amortising at 10.0% per annum, with a 5 year term; and
- a Senior Secured Revolving Credit Facility of $150 million.
- The Senior Secured Term Loans will not be subject to ongoing financial covenants.
- Credit agency rating process well advanced; ratings to be announced later this week together with indicative interest rates,
which will remain subject to limited variation within limited parameters during the debt syndication process.
• Following completion, unless the performance of the Enlarged Group were to fall significantly below the Board’s
expectations, the Board intends to:
- Implement a progressive dividend policy;
- Suspend consideration of further returns of value until such time as the Enlarged Group's net leverage is reduced to below 2.5
times Facility EBITDA**
*Including arrangement fees related to the refinancing and transaction fees payable to certain shareholders of Wizard
**Facility EBITDA being Underlying Adjusted EBITDA plus foreign exchange gains less losses, plus development costs capitalised
25
Implementation: Four Phase Plan whilst delivering sustainable
shareholder returns
FY15
FY16
FY17
FY18
Phase III: Stabilisation
• Stabilise top line
Actions
Phase II: Integration
• Standardise systems
Phase I: Assessment
Actions
• Deliver plans for FY15
• Detailed review of combined
businesses
• Invigorate Product
Management
Actions
• Rationalise Properties
• Improve GTM
productivity
• Growth from new areas
• Improved profitability
• Rationalise Legal entities
• New Go to Market (GTM)
model
• Maintain/improve cash
conversion
• Rationalise underperforming
elements
• New market initiatives
26
26
Actions
Phase IV: Growth
• Top line growth
Expected Transaction Timetable
• 15 September: announcement of Merger
• By early October: complete syndication of new debt facilities
• Early October: publication of prospectus
• By end of October:
– General meeting to approve Merger
– Competition clearances obtained
– Record date for return of value
– Share consolidation effective
• Early November:
– Expected completion of Merger
– Payment of Return of Value
27
Proposed New Management Incentive Arrangements
• Subject to shareholder approval, new incentive arrangements are to be put in place at completion, to ensure key individuals are incentivised to deliver
exceptional returns and to recognise significant incremental workload during integration period
• These incentives comprise: the Additional Responsibility Allowance (“ARA”); and Additional Share Grants (“ASGs”) (and related revisions to remuneration
policy to allow ARAs and ASGs to be adopted)
• Directors believe that ARA, ASGs and consequential revisions to remuneration policy are essential to the success of the Merger; Merger is therefore
conditional upon shareholder approval of these proposed new incentive arrangements
• ASGs, combined with awards under all other employee share plans, will not exceed 10% of the Enlarged Group’s issued ordinary share capital over any
10 year period
• On completion, salaries and overall remuneration packages of Executive Directors and certain senior managers from both Micro Focus
and Attachmate Group will be considerably below market rate for comparable businesses
• It is proposed that an ARA be paid monthly in cash to certain Executive Directors and senior managers as additional salary, until the
success of the integration project can be assessed and appropriate new salaries can be set
Additional
• The ARA will not be paid to Attachmate Group executives whose work during the integration period has already been recognised prior
Responsibility
to completion by the award of bonuses, accelerated cash awards, retention payments, change of control payments or the vesting of
Allowance
share awards
(ARA)
• The ARA will be payable monthly during a period of at least 6 months but not exceeding 3 years from the date of completion. It will be
capped at an aggregate annual value of £1.0m, hence £3.0m maximum over the 3 years.
• Subject to shareholder approval the ARA per annum payable from completion to Kevin Loosemore and Mike Phillips will be capped at
£260k and £120k respectively. The ARA will be awarded to a maximum of 12 people.
•
ASGs to comprise nil cost options representing no more than 2.5% of Enlarged listed share capital
• Stringent performance criteria. No ASG will vest if TSR is below 50% during the three year performance period to the earlier of (i) the
third anniversary of completion or (ii) 1 November 2017. Full vesting will occur if TSR over the performance period is 100% or more and
there will be vesting on a straight basis between 50% and 100%. No ultimate sale of resulting after tax awards until 1 year after vesting
period ends
• Reference price for ASGs to be 819.4 pence, being the 20 day average prior to signature of heads of terms on 3rd June 2014
Additional
Share Grants
(ASGs)
• These challenging TSR thresholds have been set to incentivise senior management to achieve TSRs in excess of Micro Focus’s stated
minimum standalone TSR objective of 15% to 20%. p.a.
- For example, if Enlarged Group achieved TSR of 15% p.a. for 3 years over reference price this would result in a cumulative TSR of
c.52%, and only c.4% of ASGs would vest
- Full vesting requires annual TSR of c.26% from the reference price, in which case the aggregate pre-tax value of awards would
represent a maximum of 5.0% of total increase in value to shareholders over the performance period
• Kevin Loosemore and Mike Phillips to receive ASGs ordinary shares equal to no more than 0.44% and 0.315% respectively of total listed
shares at Completion
• Total recipients across the Enlarged Group/New hires to28
be limited to 15 recipients
Conclusions
Creates Market
Leader With Scale
• Combination creates a top 15 global infrastructure software company with top 3 market positions in:
- Off Mainframe COBOL
- Mainframe Modernization
- Host Connectivity
- Linux Operating Systems
• SUSE and Identity and Access Management product portfolios participate in growth markets
Adds Growth &
Efficiency
Opportunities
• Attachmate host connectivity brings strong cash generation
• Opportunity to integrate and streamline operations and utilize best practices to realize operational efficiencies
• Recurring revenue and high renewal rates
- Combined entity will have 70% recurring revenue bolstered by high renewal rates across each product portfolio
Strong Combined
Group Financial
Profile
• Strong free cash flow and conservative leverage
- High margins and consistently strong free cash flow generation
- Initial gross leverage of 3.5x and net leverage of 3.3x Facility EBITDA, targeted to reduce to < 2.5x within two
years
• The deal is expected to be accretive to adjusted earnings per share for FY15 and beyond*
• Existing Micro Focus Shareholders get Return Of Value of 60 pence per share (subject to shareholder approval)
Value For
Shareholders
• Brings additional scale to market capitalisation and potentially higher liquidity
• Management incentivised to provide shareholders returns in excess of 20% per annum
* This statement is not intended to be a profit forecast, and should not be interpreted to mean that the earnings per share of the Micro Focus
Group following completion of the Merger will necessarily be above or below historical published earnings per share.
29
Agenda
Executive Summary
Annex A: Product Portfolio
Annex B: Financial Overview
Annex C: Integration
30
Deal Logic: Continuation of Micro Focus’s Strategy (I)
Micro Focus Bridges the Old and the New – Deal Enhances This Proposition
Fixed Network
• Customers’ business logic and
data remain their competitive
advantage, the key is unlocking
this value to exploit the latest
technology innovation
Mainframe
Distributed Networks
Distributed
Open/Wireless Networks
Virtual/Cloud
• Optimise how business
applications are built, tested and
deployed
Mainframe
• Execute with the right balance of
cost, flexibility and risk
Distributed
• Access applications through any
device
Virtual/Cloud
31
Deal Logic: Continuation of Micro Focus’s Strategy (II)
40+ years of innovation has opened up incredible opportunities but at the cost of huge levels
of complexity for customers…
z/OS
PL/1
Linux
Java
UNIX/LinuxC++/Java
IMS
CICS
COBOL
COBOL
Windows
C#
Web
Ajax
Flash
Mobile
32
Product Strategy: Help Bridge The Old and The New…
Micro Focus bridges the old and the new enabling customers to leverage prior investments AND
exploit the latest industry innovation
Exploit advances in
technology such as
virtualization, cloud
and mobile without the
cost and risk of starting
again with the
application suite
Protect prior
investments in their
data and business
logic whilst unlocking
new opportunities &
use cases
Optimize how they
build, test and deploy
business applications
33
Execute with a
balance of speed,
flexibility and risk, that
is right for their
business
…Leveraging New Technologies
Business application change at unprecedented levels
Process
• Agile Processes
• Outsourcing
• Crowdsourcing
Technology
• Mobile Apps / HTML5
• Cloud Computing
• Big Data
34
Business
• Compliance and
regulation
• Analytics
• Pace of change
Mature Products – COBOL
COBOL has been delivering strategic advantages for decades
Heritage:
240 billion
lines of code
Portable:
500 platforms
and rising
Fit for
Purpose:
4 times cheaper
to maintain
than Java
Easy to
Read:
Cross-train
in hours
Future Proofed:
Over $1.5 billion
annual investment
by customers
• COBOL powers ~85% of all daily business transactions
• COBOL supports 90% of Fortune 500 companies
• 240+ billion lines of COBOL code today, and growing (77% of total)
• 95% of all ATM transactions use COBOL
• 200x more COBOL transactions than Google and YouTube searches
35
Mature Products – COBOL
Micro Focus has deep COBOL expertise in distributed (off mainframe) and (on)
mainframe
COBOL Market Opportunity
Micro Focus Positioning
Heritage in Distributed
~$1.5 billion Market
• 35+ years of COBOL expertise
• Over 1 million licensed users of Micro Focus
COBOL
• Over 90% of Micro Focus COBOL customers renew
maintenance every year
Migration Expertise
• Approx. 600 migrations from IBM or proprietary
market
The Mainframe COBOL Opportunity
Proprietary
Distributed
• Point solutions historically but now have a much
more complete end to end set of offerings
IBM
• Opportunity to participate much more fully in $1.5
billion ecosystem
Source: Micro Focus management.
36
Attachmate and Novell product portfolios
have a broad suite of productivity-related tools…
Host Connectivity
File & Networking
Collaboration
• Terminal Emulation
• GroupWise
• Open Enterprise Server
- Market leading, Windows
- Robust email,
- Powerful file & print services, the latest
7-ready solution for
calendaring,
Linux, and easier than ever to
connecting web browser
task
administer
or Windows users to
management
• File Management Suite
IBM, HP, UNIX, and
and contact
- Find, govern and relocate your data
other systems
management
with a complete file management
tools
• Legacy Modernization
solution
- Non-invasive solutions
• Filr
for reusing mainframe
- Solution for customers who want onapps
premise Dropbox alternative that
- Niche focus on “off-host”
integrates with existing file servers
integration solutions
• iPrint
- Allows users to print from their
desktops, laptops and mobile devices
• File Express
- Solutions for securely transferring files
of any size, across all major platforms,
to any location
37
End Point Mgmt
• ZENworks
- Provides a
complete
Endpoint
Management
Solution allowing
organizations to
provision,
maintain, track,
protect and retire
large numbers of
client devices
Borland
Borland has been a Gartner market “Leader” for 3 years in a row
Key Drivers
Borland Positioning
• The distributed testing tool market is ~$1.5 billion in
size and growing at ~7% p.a.
- Focus for Silk product
• The market is driven by customers seeking to:
- Drive automation
- Improve workflow
- Improve traceability
- Improve reporting capabilities
• Goal is to test more, for less cost, and deliver better
software faster
Source: Gartner; Magic Quadrant for Integrated Software Quality Suites, August 2014
38
Growth Products – NetIQ
NetIQ competes in markets that are projected to grow at 9%+ p.a.
Key Drivers
Identity & Access Management Market ($m)
8000
• Increasing compliance requirements require
risk-appropriate authentication and protection of
private and other sensitive data
6000
$6,927M
$4,860M
4000
• Complexity of managing access to applications,
OS, and servers across heterogeneous
technology environments
2000
0
2013E
2017E
Ref - IDC 2013 report: Worldwide Identity and Access Management Forecast
Key Drivers
Security & Vulnerability Management Market ($m)
8000
• Big data analytics allows companies to cull
through vast volumes of information to detect
threats proactively
$6,473M
6000
$4,604M
4000
• Need to manage threats across platforms
(mobile, cloud, virtual) as well as physical
infrastructure
2000
0
2013E
2017E
Ref - IDC 2013 report: Worldwide Security and Vulnerability Management
Forecast
39
Growth Products – NetIQ
NetIQ Identity & Access Suite is regarded as a leader among competitors
Identity & Access Management
NetIQ Positioning
 Identity & Access Management software market
growing at 9% p.a. and expected to reach $6.9
billion by 2017
Risky
Bets
Contenders
Strong
Performers
Leaders
Strong
 Increasing compliance requirements require riskappropriate authentication and protection of private and
other sensitive data
NetIQ
Ping Identity
CA Technologies
Courion
 Complexity of managing access to applications, OS,
and servers across heterogeneous technology
environments
Aveksa
IBM
Oracle
Current
Offering
SecureAuth
Dell
Market Presence
Weak
Weak
Source: Forrester Research; Forrester Wave for Identity and Access Management September 2013
40
Strategy
Strong
Growth Products – SUSE
Enterprise-Grade Linux deployments projected to continue growth at a rate of 12% over the next 3 years
Key Drivers
Trends Towards Linux Continue
OS Market Share
(Servers K) (1)
100%
CAGR
'13-'17
12,328
10,559
143
87
-12%
1,998
3,099
80%
12%
2,633
60%
4,133
12%
40%
5,785
5,009
20%
0%
2013
Windows
41
2017
Paid Linux
Unpaid Linux
Unix
-4%
Growth Products – SUSE
SUSE is well-positioned in a number of key segments
SUSE Positioning
Market Share
• Despite trailing Red Hat in terms of overall market
share; SUSE is the market leader in a number of
critical sectors:
2013 Server Shipments
Unix, 1%
- Mainframe: Over 80% of all Linux running on
mainframe computers is SUSE Enterprise Server
Unpaid
Linux, 19%
- SAP: 70% of all SAP applications running on
Linux run on SUSE Linux Enterprise
Windows,
55%
- China: SUSE Linux Enterprise Server is the most
widely used commercial enterprise Linux
distribution in China
- Automotive & Defense: Nearly all of the world’s
major automobile manufacturers and almost 80%
of the U.S. Fortune 500 aerospace and defense
companies use SUSE Linux Enterprise services
Paid Linux,
25%
Paid Linux Vendors
Other,
14%
SUSE, 22%
Red Hat,
64%
Source: Red Hat April 2014 Investor Presentation
42
Agenda
Executive Summary
Annex A: Product Portfolio
Annex B: Financial Overview
Annex C: Integration
43
Attachmate Group Income Statement Evolution
Attachmate Group Segmental Revenues
(IFRS)
Year Ending March 31
(USD '000,000)
2012
2013
Attachmate Group Income Statement FY12-14
(IFRS)
Year Ending March 31
(USD '000,000)
2014
Attachmate
2012
2013
2014
1013.4
995.8
956.8
Cost of sales
167.8
156.2
151.2
%
16.6%
15.7%
15.8%
Attachmate Group Revenue
License
101.7
95.2
79.9
Maintenance
100.7
101.1
100.4
6.0
5.6
5.5
Divisional Revenue
208.4
202.0
185.8
Gross Profit
845.5
839.6
805.6
License
71.0
62.8
74.8
Sales & Marketing
354.3
347.1
341.8
Maintenance
168.9
177.7
171.0
Development
247.2
210.6
212.9
Services
50.5
47.3
43.6
G&A
127.9
85.1
78.1
Divisional Revenue
290.4
287.8
289.3
OPEX:
729.4
642.8
632.8
License
47.1
33.5
37.8
Maintenance
280.0
264.4
228.7
Services
23.1
27.7
18.6
Services
NetIQ
Novell
Divisional Revenue
EBIT
116.1
196.8
172.8
% Margin
11.5%
19.8%
18.1%
350.2
325.6
285.0
0.1
0.5
0.0
Amort Intang.
105.1
108.9
90.2
181.8
Depreciation
19.9
13.2
12.2
10.0
3.7
1.8
SUSE
License
Subscription
148.3
163.7
Services
16.0
16.3
14.9
SBC
Divisional Revenue
164.4
180.5
196.7
Exceptionals
97.9
3.8
31.2
Adj EBITDA
348.9
326.3
308.3
% Margin
34.4%
32.8%
32.2%
-4.9
1.8
4.5
Underlying Adj EBITDA*
344.0
328.2
312.8
%
33.9%
33.0%
32.7%
Attachmate Group
License
220.0
192.1
192.4
Maintenance and Subscription
697.8
706.9
681.9
Services
95.5
96.8
82.5
1013.4
995.8
956.8
Attachmate Group Revenue
FX (Gains) / losses
44
Combination Financial Summary
Income Statement Evolution FY12-14 *
(USD '000,000)
2012
2013
2014
Micro Focus
434.8
412.1
433.1
Attachmate
208.4
202.0
185.8
Net IQ
290.4
287.8
289.3
Novell
350.2
325.6
285.0
SUSE
164.4
180.5
196.7
Revenue
1448.2
1407.9
1389.9
License
396.5
359.0
370.3
Maintenance and Subscription
928.7
936.4
925.0
Services
123.0
112.5
94.5
1448.2
1407.9
1389.9
217.1
15.0%
190.2
13.5%
181.1
13.0%
1231.1
1217.7
1208.8
Sales & Marketing
481.6
464.7
462.5
Development
G&A
302.0
175.6
263.2
133.6
270.7
147.0
OPEX:
959.2
861.5
880.2
EBIT
271.9
356.2
328.6
% Margin
18.8%
25.3%
23.6%
Underlying Adj EBITDA
517.0
512.3
509.2
35.7%
36.4%
36.6%
Revenue
Total Cost of Sale
%
Gross Profit
% Margin
* Combined numbers stated under IFRS to year ended April 30th 2014 for Micro Focus and March 31st 2014 for Attachmate Group
45
Agenda
Executive Summary
Annex A: Product Portfolio
Annex B: Financial Overview
Annex C: Integration
46
Executive summary: integration
Workstream structure
Steering Committee
Micro Focus Integration
Director
Attachmate Group
Integration Lead
PMO Lead
Micro Focus Leads
IP
Day 1
Customer Care
[Resourcing]
[Performance
improvement]
Human Resources
Facilities & Ops
[Integration Plan]
IT
[North America]
Communications
Sales & Sales Ops
Marketing
Professional Services
Tax
Finance
Legal
Product Development
47
Sponsors
Attachmate
Group Leads
Executive summary: integration
Roles & responsibilities
Programme Management Office
• Define the Day 1 management process
• Support and coach the workstreams to
deliver Day 1 and wider integration
• Provide consistent and accurate progress
reporting
• Manage overall programme timeline,
milestones and dependencies
• Manage programme baseline and scope
• Gather and manage programme level risks,
issues and change requests
• Manage the standards and quality of
deliverables e.g. Day 1 plans, Charters,
Plans etc.
• Provides a central point for all
communications within the programme
Integration Director
• Programme Direction and Leadership
• Chair Steering Committee meetings
• Motivate teams, provide leadership and vision on the
integration
• Remove road blocks, manage politics and resolve/escalate
wider issues beyond the remit of the Programme
• Drive the overall programme
• Make ultimate prioritisation decisions
• Interface with other key stakeholders
Steering Committee
Minerva Integration Director
Athena Integration Lead
PMO Lead
Minerva Leads
IP
Day 1
Customer Care
[Resourcing]
[Performance
improvement]
Human Resources
Facilities & Ops
[Integration Plan]
IT
[North America]
Communications
Sales & Sales Ops
Day 1 Manager
• Drive the delivery of Day 1 activities
• Ensure appropriate oversight of Day 1
completion
Marketing
Professional Services
Tax
Finance
Legal
Sponsors
Athena Leads
Steering Committee
• Ensure key
decisions for Day 1
are made in a timely
manner
• Leadership and
promotion of the
programme
• Control programme
scope, funding,
objectives, strategy
• Ultimate
accountability for the
Programme
• Monitor and
reinforce delivery of
benefits
• Resolve wider
issues beyond the
remit of PMO
• Provide visible
support to the
Programme
Product Development
Workstream Sponsors
• Accountable for ensuring workstreams deliver their
objectives – for delivering a safe Day 1, and integration and
efficiencies
• Provide executive leadership to workstream leads and teams
• Ensure quality recommendations and analysis go to SteerCo
• Unlock functional blockages and release resources to work
on integration
• Determine priorities between BAU and integration, escalating
to the SteerCo where required
Workstream Leads
• Define, complete and signoff Day 1 activities, ensuring a high level of quality in
delivery
• Deliver integration efficiencies and objectives
• Co-ordinate activity of the projects within the workstream
• Manage dependencies between projects within the workstream
• Resolve issues within the workstream and escalate to the PMO when
necessary
• Manage the budget and resources within the workstream
• Act as a workstream primary point of contact for the Steer Co
48
Introduction to the Integration Blueprint
The programme has been designed to incorporate and address
critical success factors for merger integration
Clarity of purpose
• Ensure the strategic and financial
rationale for the merger is clear.
• Define the vision for the combined
business by Day 1 and for the longer
term.
• Build a “blueprint” laying out clearly what
successful integration will look like.
• Define how priorities will be determined,
especially between BAU and integration.
• Confirm the sources of synergy benefit
and drive to achieve them quickly.
• Select strong leaders to sponsor and
direct the programme within the
programme structure.
• Align structure and responsibilities with
benefits and investment to deliver them.
• Carefully select the Integration Director.
Control
• Plan early for Day 1 and prioritise all
activities to be completed within the
regulatory completion period.
• Implement robust planning and
programme management processes to
ensure benefits are rigorously tracked.
• Don’t let the programme divert attention
from day-to-day business.
• Allocate your best resources to lead
each of the workstreams.
• Ensure that constraints (resources,
capital, change capacity) are identified
early and actively managed and
optimised.
• Ensure the tools used are practical.
• Tackle risks and issues quickly and take
the tough decisions early.
Source: Deloitte LLP
49
Managing people
• Prepare the HR team early and ensure it
is fully skilled and resourced.
• Define and implement the top-level
organisation structure immediately.
• Identify the different audiences, and plan
to proactively manage each of them
through the integration.
• Remove uncertainty and ambiguity by
implementing the new organisational
design as quickly as possible.
• Identify and recognise cultural
differences at an early stage and be
clear on the new culture and values.
• Plan for change at all levels.
• Implement best in class communications
and leverage the opportunity of Day 1 to
set-out the vision for the new business.
Day 1 planning: timeline
The Day 1 planning process is starting now, with Attachmate Group
involvement where possible, and will be fully active from Day 0
25
Aug
1
Sep
8
Sep
15
Sep
22
Sep
29
Sep
06
Oct
13
Oct
20
Oct
27
Oct
Day 0 (Signing)
Day 1 (Completion)
Weekly workstream update meeting (Wednesday)
Governance
Fortnightly Steering Committee (Thursday)
Draft
objectives
complete
29
Day 1
planning &
delivery
Objectives
finalised
Refine
5
Sponsor feedback
24
round
Day 1 checklist
feedback (PR,
finalised
CS)
3
Draft Day 1 checklists
11
Update and refine Day 1 checklists
1st
1-to-1’s
(Min. & Ath.)
1-to-1’s
Reporting and tracking of Day 1 checklists
Identify long
lead items
Review with
PR, CS
Integration
workshop*
Objectives signed of by
SteerCo for workstreams
Integration
Integration principles
developed
Integration objectives developed
Develop charters
25
Develop project plans
Agree budget
Finance
workstream
support
Develop budget for Day 1 activities
* Integration Workshop

Attachmate Group and Micro Focus

Offsite preferably

Day 1 plans to be communicated, dependencies finalised

Key focus to be on integration design and planning
03
Nov
50
3
Tracking and reporting of costs