IBM has made an announcement that it would acquire Red Hat. The announcement was made public on Sunday. The deal is valued at $35B.
IBM acquisition of Red Hat
The acquisition will help IBM to expand its current business profile by offering higher-margin products and services. IBM will pay $190/ share in cash to buy all the stocks. On Friday, the share price of Red Hat closed at $ 116.68.
The acquisition will end in the second half of 2019. IBM is expected to reschedule its share repurchase program (2020 and 2021) to help pay for the acquisition. Red Hat will become a part of IBM’s high cloud division, and its CEO Jim Whitehurst will join IBM’s senior management team.
The advisors for Red Hat were Morgan Stanley and Guggenheim and the advisors for IBM were JP Morgan, Lazard and Goldman Sachs.
According to both IBM and Red Hat, the acquisition will allow businesses to engage themselves more in the cloud, keeping their applications and data portable and secure with any type of cloud or hybrid technologies.
Red Hat was established in 1993. The company is a distributor of open source software products. It helps enterprises by delivering products to its data centers. In its last fiscal year, Red Hat’s revenue was $2.92B. The company’s revenue grew between 21% in 2017 and 2018 fiscal years.
The latest acquisition is ranked third largest in the US tech history. The largest of the deal was between Dell and EMC ($ 67B merger).