What changed in this filing

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Item 1A. Risk Factors

2023-05-04 compared with 2023-02-02 · 23 added, 35 removed, 84 unchanged (41% of the section changed)

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The anticipated benefits we expect from the Micro Focus Acquisition are, necessarily, based on projections and assumptions about our combined business with Micro Focus, which may not materialize as expected or which may prove to be inaccurate.

Our business and results of operations could be adversely affected if we are unable to realize the anticipated benefits from the Micro Focus Acquisition on a timely basis or at all, including realizing the anticipated synergies from the Micro Focus Acquisition in the anticipated amounts or within the anticipated timeframes or cost expectations or at all.

Achieving the benefits of the Micro Focus Acquisition will depend, in part, on our ability to integrate the business and operations of Micro Focus successfully and efficiently with our business.

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• retaining key employees;

• implementing expected cost synergies of $400 million;

• implementing expected cost synergies of $400 million, including execution of the Micro Focus Restructuring Plan;

• obligations that we will have to counterparties of Micro Focus that arise as a result of the change in control of Micro Focus;

• the diversion of management attention from other important business objectives.

If we do not successfully manage these issues and the other challenges inherent in integrating an acquired business of the size and complexity of Micro Focus, then we may not achieve the anticipated benefits of the Micro Focus Acquisition and our revenue, expenses, operating results and financial condition could be adversely affected.

If we do not successfully manage these issues and the other challenges inherent in integrating an acquired business of the size and complexity of Micro Focus, then we may not achieve the anticipated benefits of the Micro Focus Acquisition, including through the execution of the Micro Focus Restructuring Plan, and our revenue, expenses, operating results and financial condition could be adversely affected.

The use of cash and incurrence of substantial indebtedness in connection with the financing of the Micro Focus Acquisition may have an adverse impact on our liquidity, limit our flexibility in responding to other business opportunities and increase our vulnerability to adverse economic and industry conditions

We have a significant amount of indebtedness outstanding following closing the Micro Focus Acquisition.

As of December 31, 2022 we had $5.3 billion of total indebtedness.

In connection with the financing of the Micro Focus Acquisition, on January 27, 2023, we drew down on our Revolver for $450 million, and on January 31, 2023 we drew down the entire amount of our Acquisition Term Loan, less original issuance discount and other fees.

As of March 31, 2023, we had $9.3 billion of total indebtedness.

In connection with the financing of the Micro Focus Acquisition, on January 27, 2023, we drew down on our Revolver for $450.0 million, and on January 31, 2023 we drew down the entire amount

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of our Acquisition Term Loan, net of original issuance discount and other fees.

The Acquisition Term Loan and Senior Secured Notes 2027 are secured by a first charge on substantially all of the assets of the Company and certain subsidiary guarantors on a pari passu basis with the Revolver and Term Loan B.

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Also, Micro Focus’ historical financial statements were prepared in accordance with IFRS and have not been prepared in accordance with U.S.

Micro Focus provides public financial statements semi-annually, with a fiscal year end of October 31.

Given such differences, it may be difficult for us to integrate systems in a timely fashion to produce financial statements following the closing of the Micro Focus Acquisition.

Micro Focus provided financial statements semi-annually, with a fiscal year end of October 31.

Given such differences, it may be difficult for us to integrate systems in a timely fashion to continue to produce financial statements following the closing of the Micro Focus Acquisition.

In addition, the consummation of the Micro Focus Acquisition may heighten the potential adverse effects on our business, operating results or financial condition described in the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended June 30, 2022.

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We have incurred significant transaction costs in connection with the Micro Focus Acquisition that could adversely affect our results of operations

We have incurred significant transaction costs in connection with the Micro Focus Acquisition, including payment of certain fees and expenses incurred in connection with the Micro Focus Acquisition and related transactions to obtain financing for the Micro Focus Acquisition, including entering into certain derivative transactions in connection with the Micro Focus Acquisition as further described herein.

We anticipate mark-to-market valuation adjustments for certain derivative transactions, based on foreign currency fluctuations.

We have mark-to-market valuation adjustments for certain derivative transactions, based on foreign currency fluctuations.

For more information on our mark-to-market derivatives, see Note 17 “Derivative Instruments and Hedging Activities” and Note 22 “Other Income (Expense), Net” to our Condensed Consolidated Financial Statements and Item 2.

Management's Discussion and Analysis of Financial condition and Results of Operations.

unanticipated costs may be incurred in the integration process.

Additional unanticipated costs may be incurred in the integration process.

These could adversely affect our results of operations in the period in which such expenses are recorded or our cash flow in the period in which any related costs are actually paid.

Furthermore, we have incurred and may continue to incur severance expenses and restructuring charges in connection with the Micro Focus Acquisition, which may adversely affect our operating results following the closing of the Micro Focus Acquisition in which such expenses are recorded or our cash flow in the period in which any related costs are actually paid.

Furthermore, we have incurred and may continue to incur severance expenses and restructuring charges in connection with the Micro Focus Restructuring Plan, which may adversely affect our operating results following the closing of the Micro Focus Acquisition in which such expenses are recorded or our cash flow in the period in which any related costs are actually paid.

Micro Focus’ provision for income taxes and any ultimate tax liability may differ from the amounts initially recorded and such differences could have an adverse effect on the combined company’s financial condition and results of operations.

As disclosed in Micro Focus’ Current Report on Form 6-K for the six months ended April 30, 2022 and Annual Report on Form 20-F for the year ended October 31, 2021, U.K.

tax authorities have challenged certain historic tax filing positions of Micro Focus.

As disclosed in Micro Focus’ Audited Consolidated Financial Statements for the years ended October 31, 2022 and 2021, included in our Form 8-K/A filed on April 10, 2023, the United Kingdom (U.K.) tax authorities have challenged certain historic tax filing positions of Micro Focus.

Based on Micro Focus’ assessment of the value of the underlying tax benefit under dispute, and as supported by external professional advice, it believes that it has no liability in respect of these matters and therefore no tax charge was recorded in current or previous periods.

Although Micro Focus believes its assessment is reasonable, no assurance can be made regarding the ultimate outcome of these matters.

Micro Focus is also subject to income taxes in numerous jurisdictions and significant judgment has been applied in determining its worldwide provision for income taxes.

Although the Company, after closing of the Micro Focus Acquisition, believes its assessment is reasonable, no assurance can be made regarding the ultimate outcome of these matters.

The Company, after closing of the Micro Focus Acquisition, is also subject to income taxes in numerous jurisdictions and significant judgment has been applied in determining its worldwide provision for income taxes, including matters related to the European Union (EU) State Aid and U.K.

tax authority challenge in respect of prior periods.

The provision for income taxes may be impacted by various internal and external factors that could have favorable or unfavorable effects, including changes in tax laws, regulations and/or rates, results of audits, changing interpretations of existing tax laws or regulations, changes in estimates of prior years’ items, the impact of transactions completed, the structuring of activities undertaken, the application of complex transfer pricing rules, changes in the valuation of deferred tax assets and liabilities, and changes in overall mix and levels of income before taxes.

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As a result, Micro Focus’ worldwide provision for income taxes and any ultimate tax liability may differ from the amounts initially recorded and such differences could have an adverse effect on the combined company’s financial condition and results of operations.

For more information on certain Micro Focus tax matters, see Note 10 (Taxation) to the condensed consolidated interim financial statements of Micro Focus for the six months ended April 30, 2022, included in its Current Report on Form 6-K furnished to the SEC on June 22, 2022, and Item 3.D (Risk Factors) and Note 7 (Taxation) to the consolidated financial statements of Micro Focus as of October 31, 2021, each included in the Annual Report on Form 20-F of Micro Focus for the year ended October 31, 2021.

Following completion of the Acquisition, we may inherit litigation that could materially adversely affect us.

For more information on certain tax matters relating to the Company, after closing of the Micro Focus Acquisition, see Note 7 (Taxation) to Micro Focus’ Audited Consolidated Financial Statements for the years ended October 31, 2022 and 2021, included in our Form 8-K/A filed on April 10, 2023.

Following completion of the Micro Focus Acquisition, we may inherit litigation that could materially adversely affect us.

From time to time and in the ordinary course of our business, Micro Focus has and may become involved in various legal proceedings, including commercial, product liability, employment, class action and other litigation and claims, as well as governmental and other regulatory investigations and proceedings.

Such matters can be time consuming and expensive, could divert Micro Focus' and our management's attention away from their regular business and, if such legal proceedings are adversely resolved against Micro Focus, such result could have a material adverse effect on our combined business, operating results or financial condition following completion of the Acquisition.

See Micro Focus' Current Report on Form 6-K for the six months ended April 30, 2022 and Annual Report on Form 20-F for the year ended October 31, 2021 for further information on certain Micro Focus litigation matters.

Such matters can be time consuming and expensive, could divert Micro Focus’ and our management's attention away from their regular business and, if such legal proceedings are adversely resolved against tax matters relating to the Company, after closing of the Micro Focus Acquisition, such result could have a material adverse effect on our combined business, operating results or financial condition following completion of the Micro Focus Acquisition.

See Micro Focus’ Audited Consolidated Financial Statements for the years ended October 31, 2022 and 2021, included in our Form 8-K/A filed on April 10, 2023, for further information on certain Micro Focus litigation matters.

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The following documents are filed as a part of this report:

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Company’s Form 8-K/A, filed August 29, 2022 Exhibit 2.1

Form of Common Share Certificate

Company’s Form 10-Q, filed November 3, 2022

Amended and Restated Shareholder Rights Plan Agreement between Open Text Corporation and Computershare Investor Services, Inc.

dated September 15, 2022.

Company’s Form 8-K, filed September 15, 2022 Exhibit 4.1

Indenture governing the Company’s 6.90% senior secured notes due 2027, dated as of December 1, 2022, among the Company, the subsidiary guarantors party thereto, The Bank of New York Mellon, as U.S.

trustee and Notes collateral agent, and BNY Trust Company of Canada, as Canadian trustee.

Company’s Form 8-K, filed December 1, 2022 Exhibit 4.1

Form of the Company’s 6.90% senior secured notes due 2027 (included in Exhibit 4.1).

Company’s Form 8-K, filed December 1, 2022 Exhibit 4.2

Co-operation Agreement, dated August 25, 2022, by and between the Company, Bidco and Micro Focus International plc.

Company’s Form 8-K/A, filed August 29, 2022 Exhibit 10.1

Term Loan Credit Agreement, dated August 25, 2022, by and between the Company, the guarantors party thereto, Barclays Bank PLC, as administrative agent, and certain financial institution parties thereto.

Company’s Form 8-K/A, filed August 29, 2022 Exhibit 10.2

First Amendment to Credit Agreement, dated December 1, 2022, by and among the Company, the guarantors party thereto, Barclays Bank PLC, as administrative agent and collateral agent, and certain financial institution parties thereto.

Company’s Form 8-K, filed December 1, 2022 Exhibit 10.1

Certification of the Chief Executive Officer, pursuant to Rule 13a-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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101.PRE Inline XBRL taxonomy extension presentation.

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Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

OPEN TEXT CORPORATION

February 2, 2023

Vice Chair, Chief Executive Officer and Chief Technology Officer

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors