IBM To Buy Red Hat In $34 Bln Deal

(RTTNews) - International Business Machines Corp. (IBM) said that it agreed to acquire all of the issued and outstanding common shares of Red Hat (RHT), a provider of open source cloud software, for $190.00 per share in cash, representing a total enterprise value of about $34 billion. The company intends to suspend its share repurchase program in 2020 and 2021.

"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.

"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, Red Hat.

Upon closing of the acquisition, Red Hat will join IBM's Hybrid Cloud team as a distinct unit, preserving the independence and neutrality of Red Hat's open source development heritage and commitment, current product portfolio and go-to-market strategy, and unique development culture, IBM said.

IBM stated that Red Hat will continue to be led by Jim Whitehurst and Red Hat's current management team. Jim Whitehurst also will join IBM's senior management team and report to Ginni Rometty. IBM intends to maintain Red Hat's headquarters, facilities, brands and practices.

The acquisition has been approved by the boards of directors of both IBM and Red Hat. It is subject to Red Hat shareholder approval. It also is subject to regulatory approvals and other customary closing conditions. It is expected to close in the latter half of 2019.

IBM said the acquisition will accelerate IBM's revenue growth, gross margin and free cash flow within 12 months of closing. It also will support a solid and growing dividend.

The company said it will target a leverage profile consistent with a mid to high single A credit rating. The company intends to suspend its share repurchase program in 2020 and 2021.

IBM said, "At signing, the company has ample cash, credit and bridge lines to secure the transaction financing. The company intends to close the transaction through a combination of cash and debt."

IBM closed down 1.31 percent on Friday at $124.79. RHT closed down 3.19 percent on Friday at $116.68.