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IBM shares news: Tech firm to buy software business, Red Hat, for $34 billion

IBM shares slipped in the US on Friday, ahead of news Sunday, that the tech firm is set to purchase open source software expert, Red Hat. The deal, which is set to cost $34 billion, is IBM’s largest purchase and will expand the US firms’ subscription-based software income.

IBM shares ended the US Friday trading session 1.27% lower at $124.79. The stock is currently over 2% in the red, in pre-market activity.

IBM buys Red Hat

IBM is a well-known tech company due to its longevity and early breakthroughs in the industry. However, it has been overtaken by other tech giants, such as Apple and Google. But, this latest deal could change that.

Red Hat, which is head quartered in North Carolina, has been operating for some 25 years. It provides software, including bespoke services, for businesses. IBM’s purchase will not only increase its subscription-based revenue, but also give it access to key tech that will allow it to expand its cloud services to other tech firms.

“The acquisition of Red Hat is a game-changer. It changes everything about the cloud market,” said Ginni Rometty, IBM Chairman, President and Chief Executive Officer.

“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,” Rometty added.

Deal values Red Hat at $190 per share

The deal, which CNBC said is the third biggest tech deal ever, values Red Hat at $190 per share, around a 60% premium on its $20.5 billion value as calculated, Friday.

Red Hat is also confident, this is the right decision.

“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,” said Red Hat CEO and President, Jim Whitehurst.

The deal is currently expected to complete some time in the second half of 2019.

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