With the deal, all of the outstanding common shares of Red Hat will be acquired for $190.00 per share in cash, representing a total equity value of approximately $34 billion.
Red Hat is a provider of enterprise open source software solutions, using a community-powered approach to deliver high-performing Linux, hybrid cloud, container, and Kubernetes technologies. The company allows customers to integrate new and existing IT applications, develop cloud-native applications, standardize on operating system, and automate, secure, and manage complex environments.
With the acquisition, its open hybrid cloud technologies are paired with IBM’s innovation and industry expertise, and sales leadership in more than 175 countries.
Together, IBM and Red Hat will offer a next-generation hybrid multicloud platform, which, based on open source technologies, such as Linux and Kubernetes, will allow businesses to deploy, run and manage data and applications on-premises and on private and multiple public clouds.
Red Hat will continue to be led by president and CEO Jim Whitehurst and its current management team. Whitehurst is joining IBM’s senior management team, reporting to Ginni Rometty. IBM will maintain Red Hat’s headquarters in Raleigh, North Carolina, its facilities, brands and practices.
Red Hat will operate as a distinct unit within IBM and will be reported as part of IBM’s Cloud and Cognitive Software segment.
Both companies have consistent revenue growth. IBM’s cloud revenue has grown from 4 % of total revenue in 2013 to 25 % today triggered by comprehensive range of as-a-service offerings and software, services and hardware that enable the company to advise, build, move and manage cloud solutions across public, private and on-premises environments for customers.
IBM cloud revenue for the 12-month period through the first quarter of this year grew to over $19 billion.
Red Hat’s fiscal year 2019 revenue was $3.4 billion, up 15 % year-over-year. Fiscal first quarter 2020 revenue, reported in June, was $934m, up 15 % year-over-year. In that quarter, subscription revenue was up 15 % year-over-year, including revenue from application development-related and other emerging technology offerings up 24 % year-over-year. Services revenue also grew 17 %.
The Red Hat acquisition is expected to contribute approximately two points of compound annual revenue growth to IBM over a five-year period.