Published: Mon, October 29, 2018
Markets | By Noel Gibbs

IBM buying North Carolina-based Red Hat in $34B deal

IBM buying North Carolina-based Red Hat in $34B deal

IBM says it will acquire North Carolina-based open-source software company Red Hat in a $34 billion stock deal.

A logo of IBM is seen at the Mobile World Congress in Barcelona, Spain February 28, 2018.

IBM will acquire all of the issued and outstanding common shares of Red Hat for $190.00 per share in cash, representing a total enterprise value of approximately $34 billion.

"With this acquisition, IBM will remain committed to Red Hat's open governance, open source contributions, participation in the open source community and development model, and fostering its widespread developer ecosystem".

"The acquisition of Red Hat is a game-changer", said IBM boss Ginni Rometty. This is the next chapter of the cloud.

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"Imagine Red Hat with the ability to invest even more and faster to accelerate open source innovation in emerging areas". It sells features and support on a subscription basis to its corporate customers.

"IBM will become the world's number one hybrid cloud provider, offering companies the only open cloud solution that will unlock the full value of the cloud for their businesses". "The largest software transaction in history and it's an open source company".

The two companies said IBM intends to keep Red Hat's headquarters in Raleigh, where it has more than 2,000 employees in a downtown office building, as well as maintain Red Hat's "facilities, brands and practices".

Paul Cormier, Red Hat's executive vice president and president of products and technologies, hailed the move.

Founded in 1993, Red Hat specializes in Linux operating systems, the most popular type of open-source software, which was developed as an alternative to proprietary software made by Microsoft Corp.

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The two companies said the deal, approved by their respective boards, is subject to Red Hat shareholder and regulatory approval and should be completed in the latter half of 2019.

Red Hat will continue to be led by Whitehurst and the vendor's current management team while Whitehurst will also join IBM's senior management team and report to Rometty. It has faced years of revenue declines, as it transitions its legacy computer maker business into new technology products and services. "This is an acquisition for revenue growth, this is not for cost synergies".

IBM hopes with the acquisition it will be one of, if not the leading "Hybrid Cloud" providers in the market.

The Raleigh, N.C. -based software company will operate as a distinct unit within IBM's Hybrid Cloud team. While some of that has been from divestitures, most is from declining sales in existing hardware, software and services offerings, as the company has struggled to compete with younger technology companies.

In its early days, the company enjoyed the advantage of being used extensively by the United States military as the Department of Defence has certified its Red Hat Enterprise Linux product for use.

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