IBM to acquire Red Hat in $34B blockbuster deal

IBM to acquire Red Hat in $34B blockbuster deal

Big Blue takes aim at expanding hybrid cloud market

Ginni Rometty (IBM)

Ginni Rometty (IBM)

Credit: IBM

IBM has unveiled plans to acquire open source specialists Red Hat, in a blockbuster US$34 billion deal designed to bolster the tech giant's hybrid cloud capabilities.

Terms of the deal - unveiled following a weekend of media speculation - will see Big Blue acquire all of the issued and outstanding common shares of Red Hat for US$190.00 per share in cash, in an agreement expected to be finalised in the second half of 2019.

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

“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.

“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.”

Rometty said the acquisition brings together the “best-in-class” hybrid cloud providers, enabling companies to securely move all business applications to the cloud in the process.

Following a 20-year partnership across the industry, IBM served 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.

According to Rometty, such innovations have become "core technologies" within the tech giant’s US$19 billion hybrid cloud business.

“Today's announcement is the evolution of our long-standing partnership," Rometty added. “This includes our joint hybrid cloud collaboration announcement in May, a key precursor in our journey to this day.”

With this acquisition, Rometty said IBM will “remain committed” to Red Hat's open governance, open source contributions, participation in the open source community and development model, while also "fostering" its widespread developer ecosystem.

In addition, the combined entity 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.

“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," added Jim Whitehurst, president and CEO of 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 - all while preserving our unique culture and unwavering commitment to open source innovation.”

Hybrid cloud

Rometty also pledged to continue to "build and enhance" Red Hat partnerships, including those with major cloud providers, such as Amazon Web Services (AWS), Microsoft Azure, Google Cloud and Alibaba, in addition to the IBM Cloud.

At the same time, Red Hat will aim to leverage IBM's hybrid cloud and enterprise IT scale in helping expand open source technology offerings to businesses globally.

“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 of hybrid cloud at IBM.

“In doing so, IBM will support open source technology wherever it runs, allowing it to scale significantly within commercial settings around the world.”

Upon closing of the acquisition, Red Hat will join IBM's Hybrid Cloud team as a distinct unit, with the aim of maintaining the "independence and neutrality" of Red Hat's open source development heritage.

Red Hat will continue to be led by Whitehurst and the vendor's current management team while Whitehurst will also join IBM's senior management team and report to Rometty.

IBM intends to maintain Red Hat's headquarters, facilities, brands and practices.

"IBM's commitment to keeping the things that have made Red Hat successful - always thinking about the customer and the open source community first – make this a tremendous opportunity for not only Red Hat but also open source more broadly,” added Paul Cormier, president of products and technologies at Red Hat.

“Since the day we decided to bring open source to the enterprise, our mission has remained unchanged.

"And now, one of the biggest enterprise technology companies on the planet has agreed to partner with us to scale and accelerate our efforts, bringing open source innovation to an even greater swath of the enterprise."

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