UPDATE 2-UK's Micro Focus to acquire Borland Software

* To acquire Borland for $75 million

* Says enjoyed strong end to 2008

* Shares up 16 percent

(Adds more details, quotes)

By Kate Holton

LONDON, May 6 (Reuters) - British software company Micro Focus MCRO.L is to acquire Borland Software BORL.O, once a major rival to Microsoft MSFT.O, and assets from Compuware CPWR.O, it said on Wednesday, to take a position in the software testing market and boost its U.S. presence.

Shares in the Micro Focus, which helps companies modernise their business systems software, leapt 17 percent as the group also released a positive trading statement.

Micro Focus said it had made a recommended cash offer to buy Borland for approximately $75 million in cash.

It has also agreed to buy the Application Testing and Automated Software Quality business of Compuware Corporation for around $58 million.

The group said the two deals would give Micro Focus a leading market position in the software testing business which is estimated to be worth around $2 billion a year and would complement Micro Focus’s core software modernisation business.

Numis analyst David Toms said the deals could result in an earnings per share accretion of 45 percent.

“Micro Focus has experienced a strong close to the fourth quarter and I am delighted with the current market relevance and resilience of the group,” Chief Executive Stephen Kelly said in a statement.

“Looking forward, the acquisitions announced today position Micro Focus well for significant further future growth.”

Both acquisitions are fully financed and are being funded from existing Micro Focus cash resources supplemented by a new three-year revolving credit facility of $175 million.

In a separate trading statement Micro Focus said group revenue in 2009 was expected to grow by approximately 20 percent and it hopes to achieve double-digit organic revenue growth in the core business at constant currency exchange rates.

Full-year adjusted earnings before interest, tax, depreciation and amortisation are expected to be in the range of $115 million to $117 million, compared with 2008’s $88.5 million.

Kelly told Reuters the company’s continuing strong performance had given it the confidence to acquire the two companies and broaden its reach into testing.

He said the group had benefitted from companies needing to cut their budgets and said Micro Focus’s solutions were proving highly popular in both good times and bad.

British software group Sage SGE.L said on Wednesday it had seen the software market contract in the downturn.

“I think Micro Focus stands out because we are very much playing to the cost reduction agenda for the chief information officer and chief finance officer,” he said. “That’s evidenced by the 20 percent revenue growth.”

Kelly said both deals would need to be approved by regulators and that, if accepted, integration for Compuware could be achieved by September, with Borland taking a little longer. (Editing by Greg Mahlich)