Red Hat is perhaps the world's leading provider of open source solutions, which ranges from high-performing Linux to cloud; with Kubernetes technologies, the open source container orchestration tool which has gained huge popularity.
Now, Red Hat has announced an agreement for acquisition by IBM for a whopping $34 billion, which deal will make IBM the biggest in hybrid cloud, with Red Hat as the potential operating system of choice for most cloud providers.
According to IBM, it expects growth in the use of cloud services to blossom in the coming years, with enterprises poised to make the switch from inexpensive computing applications to cloud-powered and cloud-centric applications.
Red Hat will enable IBM to expand across the hybrid cloud infrastructure, which will ultimately combine on-site servers with third-party cloud computing.
While IBM had partnered with Red Hat for over a year in integrating its cloud offerings - with Red Hat’s Open Stack private cloud platform and the public cloud by IBM, aimed to lure customers by enabling the use of Red Hat’s management for workloads in the IBM cloud.
The deal to buy Red Had is the right acquisition that will help it expand its portfolio to boost the size of its cloud business and tap into the hybrid cloud market worth over $1 trillion.
IBM has successfully paid over 60 percent premium on Red Hat's closing price of $116.68 a share as at Friday, 26 October. And the premium is closer to the 40 percent agreed on the terms of the deal.
If the acquisition is concluded, Red Hat will become a unit of IBM, and perhaps keep its leadership and culture, but should it be terminated, Red Hat would have to repay IBM $975 million in cash, according to an SEC filing.