IBM in Red Hat merger

IBM said on Sunday it had reached a deal to buy open source software company Red Hat for $34bn (R492.6bn).

The computing giant said the acquisiton would enhance its cloud offerings.

If approved it will be the third biggest tech merger in history, according to business news site CNBC. Red Hat said it was the biggest involving a software company.

The deal will see IBM acquire all of the issued and outstanding common shares of Red Hat for $190 (R2,756) per share in cash, more than $70 (R1,015) above the $116.68 (R1,692.76) at which Red Hat was trading on close of business Friday.

“The acquisition of Red Hat is a game-changer.

“It changes everything about the cloud market,” said Ginni Rometty, IBM’s chairman, president and CEO.

“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.”

Cloud computing refers to the delivery of computing services, including storage and software, over the internet to achieve economies of scale.

Hybrid cloud relates to the linking of public and private cloud platforms.

Adhering to the adage of not fixing what’s not broken, Red Hat will continue to operate as a separate unit.

IBM predicted that the move would accelerate its revenue growth, gross margin and free cash flow within 12 months of closing. The deal remains subject to Red Hat shareholder approval as well as regulatory approvals. It is expected to close in the latter half of 2019. –