IBM acquires Red Hat
IBM agreed to buy software maker Red Hat Inc. in a deal valued at about $34 billion, making it the computer-services giant’s largest acquisition ever as it expands cloud-based services.
International Business Machines Corp. will pay $190 a share in cash, the companies said Sunday in a statement after Bloomberg News first reported they were nearing a deal. Red Hat’s shares closed at $116.68 on Friday. The Raleigh, North Carolina-based company will continue as a unit of IBM with its current managers.
Buying Red Hat, which sells software and services based on the open-source Linux operating system, would give IBM a way to expand in cloud-based services at a time that only about 20 percent of businesses have made the move. Red Hat is expected to top $3 billion in sales for the first time this year as its Red Hat Enterprise Linux product attracts business from large customer.
IBM said it expects the deal to speed up revenue growth, its profit margin and free cash flow within 12 months of closing. It plans to finance the transaction through a combination of cash and debt.
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