IBM set to buy software firm Red Hat in US$34b deal

IBM has announced it will acquire North Carolina-based open-source software company Red Hat in a US$34 billion ($52b) stock deal that the technology and consulting giant’s chief executive says will advance the company to the next step in cloud computing.

IBM and Red Hat said in a joint statement that IBM would buy all Red Hat common shares at $190 apiece — 63 per cent above Red Hat’s closing price on Friday. The two companies said the deal, approved by their respective boards, is subject to Red Hat shareholder and regulatory approval and should be completed in late 2019.

Ginni Rometty, IBM’s chairman, president and CEO, says the acquisition would make IBM the world’s No. 1 hybrid cloud provider, that’s when companies use a mix of on-site, private and third-party public cloud services.

“The acquisition of Red Hat is a game-changer. It changes everything about the cloud market,” Rometty said. The two companies said IBM intends to keep Red Hat’s headquarters in Raleigh, where it has more than 2000 employees, as well as maintain Red Hat’s “facilities, brands and practices”.

Red Hat started in 1993, with its headquarters previously on the North Carolina State University campus. Today it has 12,600 workers worldwide in more than 35 countries. The two companies called the acquisition a logical step after they’ve worked together for 20 years, saying IBM served as an early supporter of Linux, a key component of Red Hat’s software distribution system.