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The Open Text building, in Waterloo, Ont.Kevin Van Paassen/The Globe and Mail

Open Text Corp. says it will buy the Dallas company Zix Corp. for US$484-million in cash as it continues its multiyear strategy to boost its cybersecurity offerings for small and medium-sized businesses.

The total transaction is worth US$860-million including debt, and values Zix at US$8.50 per share, slightly below its US$8.74 closing price Friday.

The acquisition comes two years to the week after Waterloo, Ont.-based Open Text first announced it would buy another U.S. security software firm, Carbonite Inc., for US$800-million. Open Text has become one of Canada’s most valuable technology companies through such acquisitions, with a market capitalization of $17.5-billion.

Open Text shares did not move significantly on the news, closing Monday at $64.67 on the Toronto Stock Exchange, up just 0.69 per cent. Zix’s shares were down 2.63 per cent on the Nasdaq, at US$8.51.

The Waterloo firm sells software that helps organizations manage customers, automate processes and protect data. The Zix acquisition expands Open Text’s data-protection capabilities while expanding its offerings for small and medium-sized businesses (SMBs). The company will come with more than 85,000 of such clients, adding to the 300,000 that Open Text brought into the fold with Carbonite.

Zix tries to help SMBs encrypt e-mail and secure SMBs against ransomware and phishing attacks. Mark Barrenechea, Open Text’s chief executive officer, said the growing need for such software among SMBs could provide significant growth for the company.

“These businesses often lack the skill to adequately protect their businesses from phishing and malware attacks,” he said on an analyst call Monday morning. “As I like to say, if you think it’s hard to get a security resource in Toronto, try Wichita Falls.”

He said he expects to benefit from cross-selling up-selling Carbonite and Zix software to each other’s customers within the Open Text umbrella. Zix also focuses on Microsoft services, including its cloud-based 365 suite of products such as Word and Excel – deepening Open Text’s relationship with Microsoft, whose software accounts for 90 per cent of the 100 million end devices that use Open Text services, Mr. Barrenechea said.

“We expect the acquisition to enhance Open Text’s SMB solution set, expand its distribution network, and further its Microsoft partnership,” Canadian Imperial Bank of Commerce analyst Stephanie Price said in a research note Monday.

Zix’s headquarters is also about 25 kilometres away from an Open Text research-and-development centre in Dallas. The companies said they expected the deal to close within 90 days, and Open Text said it expected the deal to boost its cloud revenues by its 2023 fiscal year. Neither company made executives available for interview.

Open Text released financial results last week for its fiscal 2022 first quarter, revealing a profit of US$132-million, up 28 per cent over the prior year. Its revenue was US$832-million, up 3.5 per cent, led primarily by cloud-services growth. Zix has struggled to consistently profit in recent years, and on Monday posted a net loss of US$4.9-million.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 19/04/24 4:00pm EDT.

SymbolName% changeLast
OTEX-T
Open Text Corp
+0.63%48.18
OTEX-Q
Open Text Cp
+0.86%35.05

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