IBM said Sunday it will pay $190 in cash for each share of Red Hat under the deal that is expected to conclude in the latter half of next year, subject to approvals by Red Hat shareholders and regulators.
Ginni Rometty, IBM chairman, president and CEO, called the transaction a “game-changer” that seeks to provide companies access to open cloud platforms and expand IBM’s collaboration with Red Hat, including the hybrid cloud partnership announced in May.
“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,” said Jim Whitehurst, Red Hat president and CEO.
Whitehurst will continue to lead Red Hat and report to Rometty as part of IBM’s senior management team.
Raleigh, N.C.-based Red Hat will run as a distinct segment under IBM’s hybrid cloud team and will maintain the neutrality and independence of its open source commitment, go-to-market strategy, product portfolio and development culture upon the deal’s completion.
The combined company will accelerate the adoption of hybrid multi-cloud platforms, advance data and application security across cloud environments and build up partnerships with Microsoft (Nasdaq: MSFT), Amazon Web Services, Google, Alibaba (NYSE: BABA) and other cloud providers.
Both companies’ boards of directors have approved the acquisition, which is expected to accelerate IBM’s free cash flow, gross margin and revenue growth within the first year of the deal’s conclusion.
Paul Smith, senior vice president and general manager of Red Hat’s public sector and a two-time Wash100 winner, oversees strategic planning, consulting, sales and marketing efforts in the government market.