IBM buys Red Hat in US$34 billion deal

IBM to acquire Red Hat in $34 billion deal Red Hat to remain ‘distinct unit

IBM to Acquire Red Hat for $34 Billion

In what may be the most significant tech acquisition of the year, IBM says it will acquire open-source software company Red Hat for approximately $34 billion.

IBM agreed to acquire software maker Red Hat Inc. for $33.4 billion in the biggest-ever acquisition for the computer-services giant.

IBM will purchase all shares of Red Hat for $190 each, a 63% premium over the company's current valuation.

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Red Hat, which is publicly traded, has a market cap of $20.5 billion. Both Red Hat and IBM both participate in the enterprise and private cloud market together, already. It expects to become the world's leading "hybrid cloud provider" (that is, a mix of local and outside cloud services) and will treat Red Hat as a "distinct unit" inside its Hybrid Cloud group.

The Center for Media Justice launched an online petition a year ago to stop IBM from developing cloud resources that would use facial recognition technology to identify undocumented immigrants so that they can be detained, denied visas and deported from the United States. "It changes everything about the cloud market", said Ginni Rometty, IBM's chairman and chief executive officer, in the statement. IBM intends to maintain Red Hat's headquarters, facilities, brands and practices. Red Hat's share price was 28 percent down over the past six months.

Red Hat CEO Jim Whitehurst said IBM will give it scale while preserving an open source commitment.

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If you ask IBM, the deal is all about the cloud.

"In addition, IBM and Red Hat will remain committed to the continued freedom of open source, via such efforts as Patent Promise, GPL Cooperation Commitment, the Open Invention Network and the LOT Network", the two companies said. It also is subject to regulatory approvals and other customary closing conditions and is expected to close in the latter half of 2019.

Red Hat itself has been missing analyst targets and also guided below expectations for their next quarter, raising concerns that the company itself was losing out to rivals. But according to IBM, the combined assets of both firms will bring a major boost to "open source as the basis for digital transformation", using technologies such as Linux, containers, Kubernetes, multi-cloud management, and cloud management and automation.

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