SUSE To Go Private

SUSE has gone through more than its fair share of corporate restructuring, and here comes another one.

In an unexpected corporate restructuring move, SUSE, the European open-source powerhouse behind SUSE Linux Enterprise (SLE), Rancher, NeuVector, and other important open-source programs, has announced its majority owner intends to take SUSE private. The majority shareholder, Marcel LUX III SARL (Marcel), aims to merge the company from the Frankfurt Stock Exchange into an unlisted Luxembourg S.A. entity.

Marcel, a holding company legally controlled by EQT VIII fund entities and managed by affiliates of EQT AB, Stockholm, Sweden, currently holds a commanding 79% of SUSE’s shares. Together, Marcel and EQT VIII fund entities are referred to as EQT Private Equity.

This comes after a long history of going from one owner and organization to another. SUSE, independent from its founding in 1992, was one of the first Linux companies and was acquired by Novell in 2004. Next, Attachmate acquired Novell in 2010. Micro Focus, in turn, acquired Novell in 2014. SUSE was then spun out into an independent division. Then, it was sold to EQT in the middle of 2018. Five years later, here we go again.

Before the delisting, EQT Private Equity plans to launch a voluntary public purchase offer to SUSE’s remaining shareholders. Marcel has committed to pay a price of EUR 16.00 per SUSE share, less the gross amount per share of an interim dividend paid by SUSE. This represents a 67% premium on SUSE’s closing share price of EUR 9.605 on 17 August 2023.

Both SUSE’s Management and Supervisory Boards have expressed support for the strategic opportunity presented by this delisting. They believe that it will enable SUSE to concentrate on its operational priorities and the execution of its long-term strategy without the pressure of public markets.

To facilitate the transaction, SUSE has entered into a Transaction Framework Agreement (TFA) with Marcel, which includes provisions for paying the interim dividend. This interim dividend, to be paid to all shareholders before the settlement of the offer, will assist Marcel in financing its purchase of SUSE shares under the offer and covering specific transaction costs.

“The strategic opportunity of taking the company private gives us the right setting to grow the business and deliver on our strategy with the new leadership team in place,” said Dirk-Peter van Leeuwen, CEO of SUSE. “Our partnership with EQT Private Equity in a private setting has been fruitful before, and we are excited about the long-term potential of the company and our continued collaboration.”

The offer document will be published by Marcel soon, initiating an acceptance period of at least four weeks. Settlement of the offer is anticipated to occur in the first half of October 2023. Subsequently, an extraordinary general meeting of SUSE is expected to be held in the fourth calendar quarter of 2023. Afterward, the company will be taken private.

Under the terms of the TFA, SUSE is committed to declaring and paying an interim dividend to all shareholders, regardless of whether they accept the offer. This dividend will be funded through a combination of SUSE’s existing cash and additional borrowing, which is not expected to exceed EUR 500 million.

There is, however, no obligation for shareholders to accept the offer. EQT Private Equity assures stock owners that it won't pursue a squeeze-out. Therefore, shareholders desiring to remain invested in SUSE in its new private setting will have the option to do so.

As usual, this transaction is subject to various conditions, including receipt by Marcel of an interim dividend for the SUSE shares held by it, which must be sufficient to fund the offer price for all tendered SUSE shares and certain transaction costs.

Considering the nature of the deal and Marcel's dominating stock position, I've no doubt this deal will go through. What that will mean for SUSE remains to be seen. I will say, though, that SUSE manages to keep going despite one ownership and management change after another. I'm sure it will make it through this one too.

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