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IBM acquires open-source distributor Red Hat for $34bn

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US-based IT giant IBM has reached an agreement to acquire Red Hat, the companies have announced. IBM will buy all of Red Hat’s available shares at $190 each in cash, placing the deal at an estimated $34bn.

Red Hat is the world’s largest distributor of open-source software and is best known for Red Hat Enterprise Linux. It also offers storage, application and consulting services and is a major contributor to many open-source software projects. According to a joint statement, IBM and Red Hat will work together to provide an “open approach to cloud, featuring unprecedented security and portability across multiple clouds”.

IBM has promised to honour Red Hat’s open governance, open-source contribution and major participation in the open-source community. Red Hat will maintain its facilities and branding and will continue to be led by president and CEO Jim Whitehurst, who will also join the ranks of IBM senior management.

“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 Whitehurst. “Joining forces with IBM will provide us with a greater level of scale, resources and capabilities to accelerate the impact of open source as a 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.”

Red Hat will operate as a distinct unit within IBM’s $19bn (£14.8nm) Hybrid Cloud business, which offers a combination of public cloud services with private, on-premises cloud services to support businesses’ workloads. According to their joint statement, the partnership will help clients create “cloud native” business applications with consistent cloud management. The acquisition is likely to be seen as a major boost to IBM’s growing cloud business and will make the company the world’s largest hybrid cloud provider.

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

“Most companies today are only 20 per cent along their cloud journey, renting compute [sic] 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.”

The acquisition of Red Hat is IBM’s largest-ever deal and is one of the largest mergers in the history of US tech. The deal comes just months after Microsoft announced that it would acquire GitHub – the world’s largest open-source code repository – for $7.5bn (£5.8bn), prompting concern that GitHub’s open-source legacy could be threatened by the arrangement. In a statement issued to CNBC, Rometty commented that Microsoft’s acquisition was “irrelevant” to IBM’s decision to acquire Red Hat.

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