IBM Pays $34 Billion to Acquire Red Hat

Red Hat, one of the main suppliers of software and technology, has been acquired by IBM. The two companies made public that the deal was closed for $34 billion Sunday.  IBM has agreed to purchase all shares from Red Hat at the amount of $190 per share. Before the agreement was announced, Red Hat shares closed at $116.68 on Friday.

Red Hat CEO Jim Whitehurst will join IBM´s senior management team and report to CEO Ginni Rometty. With this purchase, IBM has made its largest ever transaction and the third-largest in United States technology history. Other big ticket transactions have included the $67 billion merger between Dell and EMC in 2016.

Red Hat, a provider of open-source operating system, was founded 25 years ago. The operating system is normally used to control company data centers.  Red Hat Enterprise Linux, in addition to other technologies used in other data centers, has received the support of Red Hat. The company earned $259 million in profit on $2.92 billion in revenue last year. During 2017 and 2018, its profits have increased an average 21%.

IBM Chief Executive Officer Ginni Rometty commented that the transaction should not be misinterpreted to think that she would be leaving her job as IBM’s top executive.  She also mentioned to that she is not going anywhere and is not old enough yet to retire.

Microsoft´s deal of $7.5 billion to acquire GitHub was one of the main tech transactions of the year. Another big acquisition was Salesforce´s $6.5 billion purchase of MuleSoft. These two major transactions took place prior to IBM acquiring Red Hat for $34 billion.

Red Hat had announced at one time that it was considering a sale to Google and other corporations, but no serious decisions were ever reached, until it reached one this past weekend with IBM.

For the last five years, IBM´s profits have gradually decreased and the tech giant hopes this acquisition will help to turn that trend around.

IBM has also been working hard to catch up with Microsoft and Amazon in the cloud business and has announced big cloud agreements with ExxonMobil and other businesses.

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