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Zix Stock Drops on Open Text Takeover Bid

Open Text has agreed to buy email encryption company Zix in an $860 million deal.

Shares of Zix  (ZIXI) - Get Zix Corporation Report traded lower Monday after the software company said it had entered a definitive agreement to be acquired by Open Text  (OTEX) - Get Open Text Corporation Report for $8.50 a share in an all cash deal.

Under terms of the deal, Open Text will buy Zix for $8.50 a share in cash, a 2.7% discount from Friday’s closing price of $8.74. 

"This transaction, which has been unanimously approved by the Zix Board, delivers to Zix's stockholders liquidity, value certainty and a high likelihood and speed to closing with a proven acquiror," said Chairman Robert Hausmann in a statement.

Shares of the Dallas company closed 2.6% lower to $8.51.

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Zix management and its financial advisor conducted a broad outreach to more than 70 strategic and financial parties over a number of months in a precursor to the deal.

The transaction is expected to close within the next three months, subject to customary regulatory approvals, the company said.

Citi is acting as exclusive financial advisor to Zix, and Baker Botts is acting as legal counsel.

Open Text's revenue rose 8.1% to $894 million in the quarter ended June 30, while adjusted profit more than doubled, according to Bloomberg.

The company expects $6 billion in free cash flow over the next five years, according to a Bloomberg News report.