IBM Completes $34 Billion Red Hat Acquisition

IBM vows to retain Red Hat's independence and neutrality with Red Hat retaining its current management and Raleigh, N.C., headquarters.

IBM completed its $34 billion acquisition of open-source software vendor Tuesday in a move the company said will make it a leader in the market for hybrid cloud computing.

The acquisition wraps up the lengthy acquisition process that began Oct. 28 when the two companies first disclosed the deal under which IBM would buy Red Hat for $190 per share in cash. The close of the deal comes less than two weeks after the European Commission granted its approval for the acquisition.

"Businesses are starting the next chapter of their digital reinventions, modernizing infrastructure and moving mission-critical workloads across private clouds and multiple clouds from multiple vendors," said Ginni Rometty, IBM chairman, president and CEO, in a statement. "They need open, flexible technology to manage these hybrid multicloud environments. And they need partners they can trust to manage and secure these systems. IBM and Red Hat are uniquely suited to meet these needs. As the leading hybrid cloud provider, we will help clients forge the technology foundations of their business for decades to come."

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Tuesday IBM said it had acquired all of the issued and outstanding common shares of Red Hat. In May IBM sold $20 billion in bonds to help pay for the acquisition.

IBM intends to leverage Red Hat's software, including its Linux and Kubernetes software, with its own cloud technologies to offer a next-generation hybrid, multi-cloud platform that businesses and organizations use to securely deploy, run and manage data and applications in on-premise systems and on private and multiple public clouds.

"When we talk to customers, their challenges are clear: They need to move faster and differentiate through technology. They want to build more collaborative cultures, and they need solutions that give them the flexibility to build and deploy any app or workload, anywhere," said Jim Whitehurst, Red Hat's president and CEO, in a statement. "We think open source has become the de facto standard in technology because it enables these solutions. Joining forces with IBM gives Red Hat the opportunity to bring more open source innovation to an even broader range of organizations and will enable us to scale to meet the need for hybrid cloud solutions that deliver true choice and agility."

Whitehurst will continue to lead Red Hat, reporting to Rometty, and the company's current management team is expected to remain in place. The company's results will be reported as part of IBM's Cloud and Cognitive Software segment.

IBM has also said it intends to operate Red Hat as an independent business unit and preserve its neutrality in the open-source software world. The company will maintain its Raleigh, N.C., headquarters, as well as its facilities, brands and practices, the companies said Tuesday.

Red Hat recently reported that revenue in its fiscal 2020 first quarter (ended May 31) was $934 million, up 15 percent year over year. For all of fiscal 2019 Red Hat reported revenue of $3.4 billion.