IBM plans to acquire enterprise open source cloud software solutions company Red Hat for approximately $34 billion.
The companies reached a definitive agreement for IBM to acquire all of the issued and outstanding common shares of Red Hat for $190 per share in cash, up from the pre-acquisition price of $116. IBM will finance the deal with a combination of cash and debt, and will suspend share buybacks in 2020 and 2021 to help pay for the acquisition.
The acquisition has been approved by the boards of directors of both companies, but is subject to Red Hat shareholder approval, as well as regulatory approvals and other customary closing conditions. It is expected to close in the latter half of 2019. Upon closing, Red Hat will join IBM's Hybrid Cloud team as a distinct unit, and will maintain its current management team and headquarters, facilities, brands and practices.
The mainframe company goes open source
"The acquisition of Red Hat is a game-changer. It changes everything about the cloud market," Ginni Rometty, IBM chairman, president and CEO, said.
"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. Most companies today are only 20 percent along their cloud journey, renting compute power to cut costs. The next 80 percent is about unlocking real business value and driving growth. This is the next chapter of the cloud."
Jim Whitehurst, Red Hat president and CEO, added: "Open source is the default choice for modern IT solutions, and I'm incredibly proud of the role Red Hat has played in making that a reality in the enterprise. Joining forces with IBM will provide us with a greater level of scale, resources and capabilities to accelerate the impact of open source as the basis for digital transformation and bring Red Hat to an even wider audience – all while preserving our unique culture and unwavering commitment to open source innovation."
IBM said that it will remain committed to Red Hat's open governance, open source contributions, participation in the open source community and development model, and fostering its developer ecosystem. The combined company will also "continue to build and enhance Red Hat partnerships," including with major cloud providers, such as Amazon Web Services, Microsoft Azure, Google Cloud, Alibaba and others, along with IBM Cloud. Services spanning Linux, containers, Kubernetes, multi-cloud management, and cloud management and automation, are expected to continue.
"IBM is committed to being an authentic multi-cloud provider, and we will prioritize the use of Red Hat technology across multiple clouds" Arvind Krishna, SVP of IBM Hybrid Cloud, said. "In doing so, IBM will support open source technology wherever it runs, allowing it to scale significantly within commercial settings around the world."
