European Regulators Give Their Blessing To IBM-Red Hat Merger

An analysis from the European Commission, an arm of the European Union, raises no concerns of stifled competition resulting from IBM and Red Hat merging their portfolios.

IBM leapt over another hurdle Thursday in its bid to buy open-source software giant Red Hat by winning unconditional approval from Europe's anti-trust regulator, which found the $34 billion deal could actually drive multi-cloud adoption.

An analysis from the European Commission, an arm of the European Union, raised no concerns of stifled competition resulting from IBM and Red Hat merging their portfolios or even taking potentially aggressive steps to make Red Hat's market-leading Linux distribution less accessible to rival cloud providers.

First looking at the middleware and system infrastructure software markets in which IBM and Red Hat products overlap, "the Commission found that the merged entity would continue to face significant competition from other players in all potential markets," it said in a statement.

[Related: IBM Sells $20 Billion In Bonds To Fund Red Hat Acquisition]

Any efforts to "reduce the competitiveness" of rival products by "degrading their interoperability with Red Hat Enterprise Linux" would fail, the European Commission concluded, because of limits on the combined company's market power.

"Moreover, as the success of Red Hat significantly hinges on its neutrality, any strategy impairing this neutrality would likely damage Red Hat's business, by shifting the focus of customers, developers and partners alike to competing open-source solutions," it said.

Finally, potential attempts to limit access to Red Hat's open-source code would also backfire by certainly triggering "strong adverse counter-reactions" from open-source communities that would ultimately only harm Red Hat's products, according to the European Commission.

The merger of the two enterprise IT giants more likely would be a boon for competition by driving further adoption of heterogenous computing environments spanning different vendors, it said.

IBM's stated intention to leverage Red Hat technology to bring to market open hybrid cloud solutions "would increase choice for enterprise customers who could more easily shift workloads between on- premise servers and multiple public and private cloud," the European Commission said.

An IBM spokesperson wouldn't comment on the decision beyond saying the company anticipates the deal closing in the second half of the year.