IBM is buying Red Hat for $34bn

null

IBM has confirmed it is buying software firm Red Hat for $34 billion.

Red Hat is a software company most known for being a distributor of a version of Linux, an open-source operating system that businesses usually use to run data centres.

The computing giant will be shelling out $190 for each of Red Hat's shares. The shares were valued at $116 on Friday, when trading closed.

“The acquisition of Red Hat is a game-changer. It changes everything about the cloud market,” said Ginni Rometty, IBM Chairman, President and Chief Executive Officer. “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. 

Under the agreement, Red Hat will become part of IBM's Hybrid Cloud division. Its CEO, Jim Whitehurst, will join IBM's senior management team and will be reporting directly to company CEO Ginni Rometty.

"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, President and CEO of Red Hat.

IBM will be suspending its share repurchases program in 2020 and 2021, the statement claimed, but it was also said that the dividend will not be touched.

“The pause is a cautionary measure as the company plans on returning to its normal leverage ratio in about two years”, the statement said.

CNBC was quick to point out that buying open-source companies is all the rage nowadays. Prior to this announcement, Microsoft bought GitHub which was interpreted as quite a big deal, while Salesforce bought Mulesoft.

Image Credit: Majestic B / Shutterstock