IBM said Sunday it has reached a deal to buy open source software company Red Hat for $34 billion, among the biggest tech mergers in history which the computing giant said would enhance its cloud offerings.
If approved it will be the third biggest tech merger in history, according to business news site CNBC. Red Hat said it was the biggest involving a software company.
The deal will see IBM acquire all of the issued and outstanding common shares of Red Hat for $190.00 per share in cash, more than $70 above the $116.68 at which Red Hat was trading on close of business Friday.
“The acquisition of Red Hat is a game-changer. It changes everything about the cloud market,” said Ginni Rometty, IBM’s chairman, president and CEO.
“IBM will become the world’s number one hybrid cloud provider, offering companies the only open cloud solution that will unlock the full value of the cloud for their businesses.”
Cloud computing refers to the delivery of computing services, including storage and software, over the internet to achieve economies of scale.
Hybrid cloud relates to the linking of public and private cloud platforms.
IBM’s Rometty added that most companies are currently being held back in their cloud transformation due to closed platforms.
Once known primarily for its computer hardware, IBM has made cloud computing a priority in its growth strategy, like Amazon and Microsoft.
Over the past few years, the company has been refocusing on markets such as analytics, mobile and security, grouped under the banner of “strategic imperatives” and designed to offset the decline of its traditional activities. These now represent about half of its turnover.
Adhering to the adage of not fixing what’s not broken, Red Hat will continue to operate as a separate unit.
Red Hat will continue to be led by its president and CEO Jim Whitehurst and its current management team. Whitehurst also will join IBM’s senior management team and report to Rometty.
