IBM and Red Hat have reached a definitive agreement under which IBM will acquire Red Hat for $190.00 per share in cash, representing a total enterprise value of approximately US$34 billion.
"The acquisition of Red Hat is a game-changer. It changes everything about the cloud market," says IBM Chairman, President and Chief Executive Officer Ginni Rometty.
"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. Most companies today are only 20% along their cloud journey, renting compute power to cut costs.
“The next 80% is about unlocking real business value and driving growth. This is the next chapter of the cloud. It requires shifting business applications to hybrid cloud, extracting more data and optimising every part of the business, from supply chains to sales."
Research shows that 80% of business workloads have yet to move to the cloud, held back by the proprietary nature of today's cloud market.
This prevents portability of data and applications across multiple clouds, data security in a multi-cloud environment and consistent cloud management.
"Open source is the default choice for modern IT solutions, and I'm incredibly proud of the role Red Hat has played in making that a reality in the enterprise," says Red Hat President and CEO Jim Whitehurst.
"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."
IBM's and Red Hat's partnership has spanned 20 years, with IBM serving as an early supporter of Linux, collaborating with Red Hat to help develop and grow enterprise-grade Linux and more recently to bring enterprise Kubernetes and hybrid cloud solutions to customers.
These innovations have become core technologies within IBM's $19 billion hybrid cloud business.
Between them, IBM and Red Hat have contributed more to the open source community than any other organisation.
"Today's announcement is the evolution of our long-standing partnership," says Rometty.
"This includes our joint Hybrid Cloud collaboration announcement in May, a key precursor in our journey to this day."
With this acquisition, IBM will remain committed to Red Hat's open governance, open source contributions, participation in the open source community and development model, and fostering its widespread developer ecosystem.
In addition, IBM and Red Hat will remain committed to the continued freedom of open source, via such efforts as Patent Promise, GPL Cooperation Commitment, the Open Invention Network and the LOT Network.
IBM and Red Hat also will continue to build and enhance Red Hat partnerships, including those with major cloud providers, such as Amazon Web Services, Microsoft Azure, Google Cloud, Alibaba and more, in addition to the IBM Cloud.
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.
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.