IBM Announces $34 Billion Red Hat Deal

• IBM Announces $34 Billion Red Hat Deal

In an effort to better position itself and diversify its hardware business, IBM Corp, on Sunday announced it has agreed to acquire U.S. Software company, Red Hat Inc, for $34 billion.

The deal is by far IBM’s biggest acquisition and underscores IBM’s Chief Executive Ginni Rometty’s efforts at expanding the company’s subscription-based software despite slowing sales and waning demand for mainframe servers.

According to the IBM, which has a market value of $114 billion, $190 will be paid per Red Hat’s share in Cash, a 63 percent premium as at Friday’s closing price.

Red Hat, founded in 1993, specializes in Linux operating systems, the world’s most popular open source software.

According to Rometty, IBM’s CEO since 2012, Red Hat is one of the very few companies in the cloud computing sector that has both revenue growth and free cash flow.

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

“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 added.