Red Hat governance, brands, headquarters and facilities to be retained under IBM ownership
IBM is to acquire Red Hat in an all-cash deal valuing the open-source software and services company at $34 billion, a premium of 63 per cent compared to Red Hat’s closing share price on Friday.
IBM claimed that it would pay for the deal by suspending its share-buyback scheme in 2020 and 2021.
Red Hat will become a unit within IBM’s Hybrid Cloud division, with Red Hat CEO Jim Whitehurst joining IBM’s senior management team, and reporting to IBM CEO Ginni Rometty. Red Hat governance, brands, headquarters and facilities would also be retained.
The Red Hat purchase is the latest in a series of big-money acquisitions by IBM over the past ten or so years. These include its $2 billion purchase of cloud infrastructure provider Softlayer in 2013, which forms the basis of IBM’s own cloud computing business. It also acquired Cognos in 2008 for $5 billion and the Weather Channel’s data assets for $2 billion in 2015.
IBM’s acquisition of Red Hat is expected to close in second half of 2019.
“The acquisition of Red Hat is a game-changer. It changes everything about the cloud market,” said IBM CEO Ginni Rometty in a statement issued on Sunday evening.
She continued: “IBM will become the world’s #1 hybrid cloud provider, offering companies the only open cloud solution that will unlock the full value of the cloud for their businesses.
“Most companies today are only 20 per cent along their cloud journey, renting compute power to cut costs. The next 80 per cent is about unlocking real business value and driving growth.
“This is the next chapter of the cloud. It requires shifting business applications to hybrid cloud, extracting more data and optimizing every part of the business, from supply chains to sales.”
Red Hat CEO Jim Whitehurst claimed that the acquisition by IBM would provide the organisation with even more resources to drive Linux into the cloud.
“Joining forces with IBM will provide us with a greater level of scale, resources and capabilities to accelerate the impact of open source as the basis for digital transformation and bring Red Hat to an even wider audience – all while preserving our unique culture and unwavering commitment to open source innovation,” said Whitehurst in the same statement.
The statement went on to claim that IBM had been an early and long-time supporter of Linux, collaborating with Red Hat to help it develop enterprise-grade Linux back in the early 2000s, “and more recently to bring enterprise Kubernetes and hybrid cloud solutions to customers”.
The statement added: “IBM and Red Hat will remain committed to the continued freedom of open source, via such efforts as Patent Promise, GPL Cooperation Commitment, the Open Invention Network and the LOT Network.
“IBM and Red Hat also will continue to build and enhance Red Hat partnerships, including those with major cloud providers, such as Amazon Web Services, Microsoft Azure, Google Cloud, Alibaba and more, in addition to the IBM Cloud.”
IBM, added Arvind Krishna, senior vice president of IBM Hybrid Cloud, would remain “committed to being a multi-cloud provider, but would prioritise the use of Red Hat technology across multiple clouds”.
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