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OpenText Buys Zix for $860M

November 12, 2021

OpenText has entered into a definitive agreement to acquire Zix, a leader in SaaS-based email encryption, threat protection and compliance cloud solutions for Small and Medium-sized Businesses (SMBs).

"We are pleased to announce our intent to acquire Zix, and I look forward to welcoming Zix customers, partners and employees to OpenText," said OpenText CEO & CTO Mark J. Barrenechea. "We intend to integrate Carbonite, Webroot and Zix products to create a powerhouse SMB platform for data protection, threat management, email security and compliance solutions. Acquisitions of cloud growth assets like Zix highlights our commitment to our Total Growth strategy and approach to cash-based returns."

"Zix will deepen our technology and go-to-market relationship with Microsoft. Further, Zix will bring approximately 5,600 MSPs to OpenText, and create significant cross-sell opportunities in the OpenText and Zix clouds. Today's announcement demonstrates our commitment to winning in both the Enterprise and SMB markets," said Mr. Barrenechea.

"The acquisition of Carbonite in December 2019 and its successful integration has given us the confidence and readiness to expand even further into the SMB market" added OpenText EVP & CFO, Madhu Ranganathan. "Zix brings a meaningful addition to our cloud revenues and will be immediately accretive to our adjusted EBITDA. Once integrated, we expect Zix to contribute to organic growth in cloud and Annual Recurring Revenues, be on the OpenText operating model for profitability and meet our cash-based returns criteria. We remain committed to maintaining a healthy balance sheet, delivering strong earnings, and continuing to invest in our organic growth initiatives."

OpenText CEO & CTO Mark J. Barrenechea and OpenText EVP, CFO Madhu Ranganathan will host a conference call today at 9:00 a.m. Eastern Time to discuss today's announcement. Conference call details are included further below.

About the Transaction and Terms of the Agreement:

Tender offer to be commenced for all outstanding Zix common stock (including shares of common stock issued upon conversion of Zix's Series A Preferred Stock) shares for $8.50 per share in cash

Total purchase price of approximately $860 million, inclusive of Zix's cash and debt

Total purchase price is approximately 3.5x TTM (Trailing Twelve Months) Zix GAAP revenues (as of September 30, 2021)

Expect meaningful expansion of cloud revenues, adjusted EBITDA and cash flows in OpenText's Fiscal 2023

Expect Zix Annual Recurring Revenues (ARR) of greater than 90%

Immediately accretive upon closing to adjusted EBITDA, and targeting to be on the OpenText operating model within 12-18 months of closing

Funded with OpenText's existing cash on hand

Expect the transaction to close within 90 days of this announcement

Financial projections and target models will be provided on the earnings call following the closing of the transaction

OpenText, through a wholly owned subsidiary, intends to commence the tender offer for all of the common shares of Zix within 10 business days. Pursuant to the merger agreement, the tender offer will be followed by a merger to acquire any untendered shares. The tender offer is subject to the tender of at least one share more than two-thirds of all of the issued and outstanding common shares of Zix and certain other regulatory approvals and customary closing conditions. The holders of approximately 31% of Zix's issued and outstanding shares of common stock (including shares of common stock issuable upon the conversion of Zix's Series A Preferred Stock) have agreed to tender their shares to OpenText pursuant to the tender offer in accordance with the terms of certain support agreements.

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