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IBM to acquire Red Hat in deal valued at $34B

IBM announced on Sunday it will acquire software company Red Hat in an approximately $34 billion deal.

Under the deal, IBM will acquire all of the issued and outstanding common shares of Red Hat for $190 per share in cash.

"The acquisition of Red Hat is a game-changer. It changes everything about the cloud market," said IBM CEO Ginni Rometty. "IBM will become the world's #1 hybrid cloud provider, offering companies the only open cloud solution that will unlock the full value of the cloud for their businesses.”

Red Hat, which has a market capitalization of $20.5 billion, is based in Raleigh, North Carolina, and specializes in open-source software, particularly Linux. The company has partnered with IBM for 20 years, supporting the operating system in its early stages and more recently to bring hybrid cloud solutions to customers.

IBM said the acquisition – its largest ever – will enable businesses to securely move all business applications to the cloud and that the deal would strongly position the two companies to address the issue and “accelerate hybrid multi-cloud adoption.” Many firms already use multiple clouds to store data.

"Most companies today are only 20 percent along their cloud journey, renting compute power to cut costs," Rometty said. "The next 80 percent is about unlocking real business value and driving growth.

This is the next chapter of the cloud. It requires shifting business applications to hybrid cloud, extracting more data and optimizing every part of the business, from supply chains to sales."

When the acquisition is complete, Red Hat will become part of IBM’s Hybrid Cloud team as its own unit. Leadership will remain under the company’s current CEO, Jim Whitehurst, and management team.

Whitehurst will join IBM’s senior management team and report to Rometty. IBM plans to maintain Red Hat’s headquarters, facilities, brands and practices, it said.