NEW YORK (Reuters) – IBM announced Sunday that it concluded an agreement to acquire Red Hat, the world’s leading provider of “open source software”, in a $34 billion (just under €30 billion) transaction that will allow it to expand its cybersecurity offering.
Red Hat provides open source software and it is the world’s leading distributor of the GNU/Linux operating system, developed as an alternative to Microsoft software.
Red Hat has a market capitalization of $20.5 billion and IBM has a market capitalization of $114 billion.
Red Hat, which operates on a subscription basis, will allow IBM to recover a lucrative source of regular revenue.
The IT multinational hopes that this agreement will help it compete with Amazon, Alphabet, and Microsoft in the fast-growing cloud sector, which enables remote data storage and access.
The IBM-Red Hat transaction is expected to be completed in the second half of 2019.
To finance this buyback, IBM plans to suspend all its share buyback programs planned for 2020 and 2021.
Red Hat will continue to be led by Jim Whitehurst and the current management team, says IBM, which also intends to maintain the headquarters, sites, brands, and practices of the company it is buying.
IBM should make sure the Open Source community is happy with this acquisition, as you may know, the members of the community are worried that Red Hat won’t be fully open anymore, as Oracle and Microsoft did in recent acquisitions.