Red Hat Stock Soars On $34 Billion IBM Acquisition


Red Hat Inc (NYSE: RHT)

Shares of Red Hat Inc. jumped $56.39, or 48.33% to $173.07 in early minutes of regular trading on Monday after IBM Corp. agreed to acquire the software company in a cash deal valued at $34 billion.

Under the terms of the agreement, IBM will pay $190 per share in cash for all issued and outstanding common shares of Red Hat, representing a premium of 63% premium over the stock’s closing price of $116.68 on Friday.

This is the biggest acquisition that the tech giant has ever made and is also the largest tech merger of 2018. Armonk, New York-based IBM hopes that the acquisition will boost its cloud-computing business and improve its revenues.

In 2008, the company bought business software maker Cognos for $5 billion before acquiring cloud infrastructure provider Softlayer for $2 billion five years later. IBM also spent more than $2 billion in 2015 to acquire the data assets of Weather Channel.

The latest deal shows how giant tech firms are fighting competition through acquisitions, more so in the cloud computing space. Microsoft and Amazon have also recently shaken up the industry in moves aimed at boosting their revenues.

Ginni Rometty, IBM Chairman and CEO had this to say, “The acquisition of Red Hat is a game-changer. It changes everything about the cloud market. 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.”

Jim Whitehurst, President and Chief Executive Officer of Red Hat also commented, “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. 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.”

IBM and Red Hat expect to close the transaction in the latter half of 2019. Boards of both companies have approved the deal, but it is still subject to regulatory approvals and other customary closing conditions.

Red Hat Inc Company Profile

Red Hat, Inc. engages in the provision of open source software solutions. The firm operates its business through the following segments: Americas, EMEA, Asia Pacific, and Corporate. The company was founded by Robert F. Young in March 1993 and is headquartered in Raleigh, NC. – CNN Money

IBM Company Profile

International Business Machines Corporation (IBM) provides information technology products and services. The Company operates through five segments: Cognitive Solutions, Global Business Services, Technology Services & Cloud Platforms, and Systems and Global Financing. – Craft