IBM is acquiring Red Hat, a major distributor of open-source software and technology, in a deal valued around $34 billion, the companies announced on Sunday.

According to a joint statement, IBM will pay cash to buy all shares in Red Hat at $190 each. Shares in Red Hat closed at $116.68 on Friday before the deal was announced.

The open source, enterprise software maker will become a unit of IBM's Hybrid Cloud division, with Red Hat CEO Jim Whitehurst joining IBM's senior management team and reporting to CEO Ginni Rometty.



Goldman Sachs, J.P. Morgan and Lazard advised IBM on the Red Hat deal. Morgan Stanley and Guggenheim advised Red Hat.

The acquisition is by far IBM's largest deal ever, and the third-biggest in the history of U.S. tech. Excluding the AOL-Time Warner merger, the only larger deals were the $67 billion merger between Dell and EMC in 2016 and JDS Uniphase's $41 billion acquisition of optical-component supplier SDL in 2000, just as the dot-com bubble was bursting.

Red Hat started 25 years ago as a distributor of a particular flavor of Linux, an open-source operating system that is commonly used in server computers that power company data centers. Today, Red Hat is known for distributing and supporting Red Hat Enterprise Linux, as well as other technologies commonly used in data centers. The company, which went public at the peak of the dot-com boom in 1999, earned $259 million on revenue of $2.92 billion in its last fiscal year, which ended Feb. 28. Its revenue grew 21% between the 2017 and 2018 fiscal years.

Rometty told CNBC that the deal should not be interpreted as part of any plan for her to transition out of her position as CEO at IBM.



"I'm still young and I'm not going anywhere," she told CNBC.</s>IBM Corp said on Sunday it had agreed to acquire US software company Red Hat Inc for $34 billion, including debt, as it seeks to diversify its technology hardware and consulting business into higher-margin products and services.

The transaction is by far IBM’s biggest acquisition. It underscores IBM Chief Executive Ginni Rometty’s efforts to expand the company’s subscription-based software offerings, as it faces slowing software sales and waning demand for mainframe servers.

IBM, which has a market capitalization of $114 billion, will pay $190 per share in cash for Red Hat, a 63 percent premium to Friday’s closing share price.

Founded in 1993, Red Hat specializes in Linux operating systems, the most popular type of open-source software, which was developed as an alternative to proprietary software made by Microsoft Corp.

Headquartered in Raleigh, North Carolina, Red Hat charges fees to its corporate customers for custom features, maintenance and technical support, offering IBM a lucrative source of subscription revenue.

Red Hat is one of the very few companies in the cloud computing sector that has both revenue growth and free cash flow, Rometty, who has been IBM’s CEO since 2012, said in an interview with Reuters.

“This acquisition we are clearly doing for growth synergies. This is not about cost synergies at all,” Rometty said in the interview.

The acquisition illustrates how older technology companies are turning to dealmaking to gain scale and fend off competition, especially in cloud computing, where customers using enterprise software are seeking to save money by consolidating their vendor relationships.

IBM is hoping the deal will help it catch up with Amazon.com Inc, Alphabet Inc and Microsoft in the rapidly growing cloud business. IBM shares have lost almost a third of their value in the past five years, while Red Hat shares are up 170 percent over the same period.

“This deal represents the culmination of IBM’s existing partnership with Red Hat, and, in our view, allows IBM to gain a highly strategic asset to advance its hybrid cloud initiatives,” Barclays analysts wrote in a research note.

They added that for the deal to work, it was important for IBM to uphold Red Hat’s neutrality when it came to operating platforms and maintain Red Hat’s open-source and multi-cloud position in the market.

IBM was founded in 1911 and is known in the technology industry as Big Blue, a reference to its once ubiquitous blue computers. It has faced years of revenue declines, as it transitions its legacy computer maker business into new technology products and services. Its recent initiatives have included artificial intelligence and business lines around Watson, named after the supercomputer it developed.

To be sure, IBM is no stranger to acquisitions. It acquired cloud infrastructure provider Softlayer in 2013 for $2 billion, and the Weather Channel’s data assets for more than $2 billion in 2015. It also acquired Canadian business software maker Cognos in 2008 for $5 billion.

Other big technology companies have also recently sought to reinvent themselves through acquisitions. Microsoft this year acquired open source software platform GitHub for $7.5 billion; chip maker Broadcom Inc agreed to acquire software maker CA Inc for nearly $19 billion; and Adobe Inc agreed to acquire marketing software maker Marketo for $5 billion.

One of IBM’s main competitors, Dell Technologies Inc, made a big bet on software and cloud computing two years ago, when it acquired data storage company EMC for $67 billion. As part of that deal, Dell inherited an 82 percent stake in virtualization software company VMware Inc.

The deal between IBM and Red Hat is expected to close in the second half of 2019. IBM said it planned to suspend its share repurchase program in 2020 and 2021 to help pay for the deal.

IBM said Red Hat would continue to be led by Red Hat CEO Jim Whitehurst and Red Hat’s current management team. It intends to maintain Red Hat’s headquarters, facilities, brands and practices.

Lazard Ltd offered financial advice to IBM, alongside Goldman Sachs Group Inc and JPMorgan Chase & Co, which also provided financing for the deal. Paul, Weiss, Rifkind, Wharton & Garrison LLP provided legal advice to IBM.

Guggenheim Partners LLC and Morgan Stanley were financial advisers to Red Hat, while Skadden, Arps, Slate, Meagher & Flom LLP offered legal advice to the company on the deal. “Knowing first-hand how important open, hybrid cloud technologies are to helping businesses unlock value, we see the power of bringing these two companies together, and are honored to advise IBM and commit financing for this transaction,” JPMorgan CEO Jamie Dimon said in a statement.</s>(Reuters) - IBM Corp said on Sunday it had agreed to acquire U.S. software company Red Hat Inc for $34 billion, including debt, as it seeks to diversify its technology hardware and consulting business into higher-margin products and services.

The transaction is by far IBM’s biggest acquisition. It underscores IBM chief executive Ginni Rometty’s efforts to expand the company’s subscription-based software offerings, as it faces slowing software sales and waning demand for mainframe servers.

“The acquisition of Red Hat is a game-changer ... IBM will become the world’s No. 1 hybrid cloud provider, offering companies the only open cloud solution that will unlock the full value of the cloud for their businesses,” Rometty said in a statement.

IBM, which has a market capitalization of $114 billion, will pay $190 per share in cash for Red Hat, a 62 percent premium to Friday’s closing share price.

Founded in 1993, Red Hat specializes in Linux operating systems, the most popular type of open-source software, which was developed as an alternative to proprietary software made by Microsoft Corp.

Headquartered in Raleigh, North Carolina, Red Hat charges fees to its corporate customers for custom features, maintenance and technical support, offering IBM a lucrative source of subscription revenue.

The acquisition illustrates how older technology companies are turning to dealmaking to gain scale and fend off competition, especially in cloud computing, where customers using enterprise software are seeking to save money by consolidating their vendor relationships.

IBM is hoping the deal will help it catch up with Amazon.com Inc, Alphabet Inc and Microsoft in the rapidly growing cloud business. IBM shares have lost almost a third of their value in the last five years, while Red Hat shares are up 170 percent over the same period.

IBM was founded in 1911 and is known in the technology industry as Big Blue, a reference to its once ubiquitous blue computers. It has faced years of revenue declines, as it transitions its legacy computer maker business into new technology products and services. Its recent initiatives have included artificial intelligence and business lines around Watson, named after the supercomputer it developed.

To be sure, IBM is no stranger to acquisitions. It acquired cloud infrastructure provider Softlayer in 2013 for $2 billion, and the Weather Channel’s data assets for more than $2 billion in 2015. It also acquired Canadian business software maker Cognos in 2008 for $5 billion.

Other big technology companies have also recently sought to reinvent themselves through acquisitions. Microsoft Corp this year acquired open source software platform Github for $7.5 billion; chip maker Broadcom Inc agreed to acquire software maker CA Inc for nearly $19 billion; and Adobe Inc agreed to acquire marketing software maker Marketo for $5 billion.

One of IBM’s main competitors, Dell Technologies Inc, made a big bet on software and cloud computing two years ago, when it acquired data storage company EMC for $67 billion. As part of that deal, Dell inherited an 82 percent stake in virtualization software company VMware Inc.

The deal between IBM and Red Hat is expected to close in the second half of 2019. IBM said it planned to suspend its share repurchase program in 2020 and 2021 to help pay for the deal.

IBM said Red Hat will continue to be led by Red Hat CEO Jim Whitehurst and Red Hat’s current management team. It intends to maintain Red Hat’s headquarters, facilities, brands and practices.

Goldman Sachs Group Inc and JPMorgan Chase & Co advised IBM and provided financing for the deal. Guggenheim Partners LLC advised Red Hat. “Knowing first-hand how important open, hybrid cloud technologies are to helping businesses unlock value, we see the power of bringing these two companies together, and are honored to advise IBM and commit financing for this transaction,” JPMorgan CEO Jamie Dimon said in a statement.</s>IBM Corp (IBM.N) said on Sunday it had agreed to acquire U.S. software company Red Hat Inc (RHT.N) for $34 billion, including debt, as it seeks to diversify its technology hardware and consulting business into higher-margin products and services. The transaction is by far IBM’s biggest acquisition. It underscores IBM chief executive Ginni Rometty’s efforts to expand the company’s subscription-based software offerings, as it faces slowing software sales and waning demand for mainframe servers.

IBM, which has a market capitalisation of $114 billion, will pay $190 per share in cash for Red Hat, a 62 percent premium to Friday’s closing share price.

“The acquisition of Red Hat is a game-changer … IBM will become the world’s No. 1 hybrid cloud provider, offering companies the only open cloud solution that will unlock the full value of the cloud for their businesses,” Rometty said in a statement.

Red Hat specializes in Linux operating systems, the most popular type of open-source software, which was developed as an alternative to proprietary software made by Microsoft Corp (MSFT.O).

Red Hat charges fees to its corporate customers for custom features, maintenance and technical support, offering IBM a lucrative source of subscription revenue. IBM is hoping the deal will help it catch up with Amazon.com Inc (AMZN.O), Alphabet Inc (GOOGL.O) and Microsoft in the rapidly growing cloud business.

IBM has faced years of revenue declines as it transitions its legacy computer maker business into new technology products and services. Its recent initiatives have included artificial intelligence and business lines around Watson, named after the supercomputer it developed.

To be sure, IBM is no stranger to acquisitions. It acquired cloud infrastructure provider Softlayer in 2013 for $2 billion, and the Weather Channel’s data assets for more than $2 billion in 2015. It also acquired Canadian business software maker Cognos in 2008 for $5 billion.

The deal between IBM and Red Hat is expected to close in the second half of 2019. IBM said it planned to suspend its share repurchase programme in 2020 and 2021 to help pay for the deal.

IBM said Red Hat will continue to be led by Red Hat CEO Jim Whitehurst and Red Hat’s current management team. It intends to maintain Red Hat’s headquarters, facilities, brands and practices.

JPMorgan Chase & Co (JPM.N) advised IBM and is providing financing for the deal.</s>Oct 28 (Reuters) - IBM Corp is nearing an agreement to acquire software company Red Hat Inc in a deal that could exceed $30 billion and help diversify its business away from technology hardware and consulting, people familiar with the matter said on Sunday.

The deal would be by far IBM's biggest acquisition. It underscores IBM CEO Ginni Rometty's efforts to expand the company's subscription-based software offerings, as it faces slowing software sales and waning demand for mainframe servers.

An agreement between IBM and Red Hat is expected to be announced later on Sunday, the sources said, asking not to be identified because the matter is confidential. IBM and Red Hat did not immediately respond to requests for comment.

Red Hat specializes in Linux operating systems, the most popular type of open-source software, which was developed as an alternative to proprietary software made by Microsoft Corp .

Red Hat charges fees to its corporate customers for custom features, maintenance and technical support. It has a market capitalization of $20.5 billion. IBM has a market capitalization of $114 billion.

To be sure, IBM is no stranger to acquisitions. It acquired cloud infrastructure provider Softlayer in 2013 for $2 billion, and the Weather Channel's data assets for more than $2 billion in 2015. It also acquired Canadian business software maker Cognos in 2008 for $5 billion.

IBM has faced years of revenue declines as it transitions its legacy computer maker business into new technology offerings and services. It posted a bigger than expected drop in quarterly profit earlier this month. (Reporting by Liana B. Baker and Greg Roumeliotis in New York; Editing by Cynthia Osterman)</s>IBM and Red Hat announced that the companies have reached a definitive agreement under which IBM will acquire all of the issued and outstanding common shares of Red Hat for $190.00 per share in cash, representing a total enterprise value of approximately $34 billion.

IBM and Red Hat will be strongly positioned to address this issue and accelerate hybrid multi-cloud adoption. Together, they will help clients create cloud-native business applications faster, drive greater portability and security of data and applications across multiple public and private clouds, all with consistent cloud management.

IBM’s and Red Hat’s partnership has spanned 20 years, with IBM serving as an early supporter of Linux, collaborating with Red Hat to help develop and grow enterprise-grade Linux and more recently to bring enterprise Kubernetes and hybrid cloud solutions to customers. These innovations have become core technologies within IBM’s $19 billion hybrid cloud business. Between them, IBM and Red Hat have contributed more to the open source community than any other organization.

With this acquisition, IBM will remain committed to Red Hat’s open governance, open source contributions, participation in the open source community and development model, and fostering its widespread developer ecosystem. In addition, 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. At the same time, Red Hat will benefit from IBM’s hybrid cloud and enterprise IT scale in helping expand their open source technology portfolio to businesses globally.

Upon closing of the acquisition, Red Hat will join IBM’s Hybrid Cloud team as a distinct unit, preserving the independence and neutrality of Red Hat’s open source development heritage and commitment, current product portfolio and go-to-market strategy, and unique development culture. Red Hat will continue to be led by Jim Whitehurst and Red Hat’s current management team. Jim Whitehurst also will join IBM’s senior management team and report to Ginni Rometty. IBM intends to maintain Red Hat’s headquarters, facilities, brands and practices.

The acquisition of Red Hat reinforces IBM’s high-value model. It will accelerate IBM’s revenue growth, gross margin and free cash flow within 12 months of closing. It also will support a solid and growing dividend. The company will continue with a disciplined financial policy and is committed to maintaining strong investment grade credit ratings. The company will target a leverage profile consistent with a mid to high single A credit rating. The company intends to suspend its share repurchase program in 2020 and 2021. At signing, the company has ample cash, credit and bridge lines to secure the transaction financing. The company intends to close the transaction through a combination of cash and debt.

The acquisition has been approved by the boards of directors of both IBM and Red Hat. It is subject to Red Hat shareholder approval. It also is subject to regulatory approvals and other customary closing conditions. It is expected to close in the latter half of 2019.</s>IBM is acquiring Red Hat in a deal valued at $34 billion, the companies announced on Sunday.

According to a joint statement, IBM will pay cash to buy all shares in Red Hat at $190 each.

The open source, enterprise software maker will become a unit of IBM's Hybrid Cloud division, with Red Hat CEO Jim Whitehurst joining IBM's senior management team and reporting to CEO Ginni Rometty.



J.P. Morgan advised IBM and is leading the financing for the Red Hat deal.

The acquisition is by far IBM's largest deal ever, and the third-biggest in the history of U.S. tech. Excluding the AOL-Time Warner merger, the only larger deals were the $67 billion merger between Dell and EMC in 2016 and JDS Uniphase's $41 billion acquisition of optical-component supplier SDL in 2000, just as the dot-com bubble was bursting.

Rometty told CNBC that the deal should not be interpreted as part of any plan for her to transition out of her position as CEO at IBM.



"I'm still young and I'm not going anywhere," she told CNBC. 



IBM will pause share repurchases in 2020 and 2021, but won't touch its dividend. The pause is a cautionary measure as the company plans on returning to its normal leverage ratio in about 2 years

Open source has been the biggest theme in technology this year. Prior to IBM's purchase of Red Hat, two of the biggest tech deals of the year were Microsoft's $7.5 billion purchase of GitHub, a code-sharing service, and Salesforce's $6.5 billion acquisition of MuleSoft, whose technology stitches together disparate software applications, data and devices. Earlier this month, big-data rivals Cloudera and Hortonworks agreed to merge in a $5.2 billion deal.



Both Rometty and Whitehurst, in comments to CNBC, agreed that Microsoft's purchase of Github was "irrelevant" to IBM and Red Hat's decision to enter into a deal. 



While Red Hat has talked for years about potentially selling itself to other companies, including Google, never has anything gotten nearly as serious as the negotiations with IBM, according to people familiar with the matter.



"We were not looking to do something," Whitehurst told CNBC.

IBM reported lighter-than-expected revenue in its most recent earnings update. The company has been working to catch up to Amazon and Microsoft in the cloud infrastructure business.

Cloud is one of IBM's four key strategic imperatives, or growth drivers -- the others are social, mobile and analytics -- and in the quarter, IBM announced cloud deals with Economical Insurance, ExxonMobil and Novis.

IBM and Red Hat said the deal would enable businesses to do even more work in the cloud, keeping their apps and data portable and secure, no matter which cloud or hybrid technologies they adopt.

--CNBC's Alex Sherman, David Faber, Ari Levy and Jordan Novet contributed to this report.</s>IBM has agreed to acquire open-source software company Red Hat for $34 billion, the company announced Sunday.

IBM hopes the acquisition will help it expand its position in the enterprise cloud computing market to better compete with the likes of Amazon, Google and Microsoft. Red Hat, which specialized in the Linux operating system, charges customers for support, training and consulting services.

The acquisition -- IBM's largest ever – highlights the company's efforts to increase subscription-based software offerings as demand for mainframe servers and software declines.

"The acquisition of Red Hat is a game-changer. It changes everything about the cloud market," IBM CEO Ginni Rometty said in a statement. "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."

The Raleigh, N.C.-based software company will operate as a distinct unit within IBM's Hybrid Cloud team.

IBM will pay $190 per share in cash for Red Hat, a 62 percent premium over Friday's closing share price. The deal is expected to close in the second half of 2019.

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NASA turns 60: The space agency has taken humanity farther than anyone else, and it has plans to go further.</s>San Francisco, Oct 29 (IANS) Sending a strong signal towards dominating the emerging $1 trillion Hybrid Cloud market, tech major IBM has announced to acquire Open Source Solutions leader Red Hat for a massive $34 billion.

The acquisition, IBM’s biggest so far, will provide open approach to Cloud, featuring unprecedented security and portability across multiple clouds, a joint statement said late Sunday.

The deal, once goes through, will make IBM top Hybrid Cloud provider in an emerging $1 trillion growth market.

“The acquisition of Red Hat is a game-changer. It changes everything about the cloud market,” said Ginni Rometty, IBM Chairman, President and Chief Executive Officer.

“IBM will become the world’s top hybrid cloud provider, offering companies the only open cloud solution that will unlock the full value of the cloud for their businesses,” she added.

Red Hat will operate as a distinct unit within IBM’s Hybrid Cloud team.

IBM will acquire all of the issued and outstanding common shares of Red Hat for $190 per share in cash, representing a total enterprise value of approximately $34 billion.

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 optimising every part of the business, from supply chains to sales,a informed Rometty.

IBM and Red Hat will be positioned to accelerate Hybrid multi-cloud adoption.

“Open source is the default choice for modern IT solutions, and I’m incredibly proud of the role Red Hat has played in making that a reality in the enterprise,” said Jim Whitehurst, President and CEO, Red Hat.

“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,” he added.

IBM’s and Red Hat’s partnership has spanned 20 years, with IBM serving as an early supporter of Linux, collaborating with Red Hat to help develop and grow enterprise-grade Linux and more recently to bring enterprise Kubernetes and hybrid cloud solutions to customers.

These innovations have become core technologies within IBM’s $19 billion Hybrid Cloud business.

IBM and Red Hat 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 is committed to being an authentic multi-cloud provider, and we will prioritise the use of Red Hat technology across multiple clouds” said Arvind Krishna, Senior Vice President, IBM Hybrid Cloud.

The Red Hat acquisition by IBM is the third-biggest in the history of US technology.

The biggest acquisition was the $67 billion merger between Dell and EMC in 2016 and JDS Uniphase’s $41 billion acquisition of optical-component firm SDL in 2000.

Last week, Microsoft closed a $7.5 billion acquisition of the code hosting and collaboration company GitHub.</s>NEW YORK — In a massive deal that could reshape cloud computing, IBM is acquiring open software company Red Hat for $34 billion.

The companies called the deal, which still needs approval from shareholders and regulators, the “most significant tech acquisition of 2018.” The deal is expected to close in the second half of 2019.

“The acquisition of Red Hat is a game-changer. It changes everything about the cloud market,” IBM chief Ginni Rometty said in a statement.

The cloud, simply, refers to software and services that run on the internet instead of your computer. Dropbox, Netflix, Flickr, Google Drive, Microsoft Office 365, Yahoo Mail are all cloud services.

These various platforms often don’t allow data to easily move between them.

Red Hat says its software solves that issue by allowing data to be more easily moved around.

Together, IBM and Red Hat say they will be “strongly positioned to address this issue.”

IBM buying Red Hat means that it will start providing technology to its biggest competitors, including Amazon, Microsoft and Google. Red Hat partners with all of them, and IBM said it will continue the partnerships after the acquisition and work to expand on them.

CFO Jim Kavanaugh told investors during a conference call earlier this month that its cloud unit brought in $19 billion, up more than 20% from the same time last year.
American computer company IBM announces plans to acquire American software company Red Hat for US$34 billion.