RALEIGH – By approving the $34 billion merger with IBM yesterday, Red Hat shareholders can expect to receive a significant windfall once the deal is done.
In a proxy statement sent to shareholders ahead of the vote, Red Hat CEO and president James Whitehurst confirmed that shareholders would be entitled to receive $190 in cash, without interest, for each share of our common stock that they own, if the merger is completed.
That represents a premium of about 62.8 percent to Red Hat’s closing stock price on October 26, 2018, the last trading day prior to the announcement of the merger.
Another way of saying it: approximately 51.7 percent to the volume weighted average stock price of Red Hat common stock during the 30 days prior to that day, or around 7.8 percent to the highest closing stock price of Red Hat common stock during the 52-week period before.
As Red Hat employees shuffled into work on a chilly Wednesday morning, a handful of shareholders turned up in person to approve the deal at Red Hat’s downtown Raleigh headquarters. Shareholders also signed off on a “non-binding, advisory vote” compensation that will or may become payable to the named executive officers of Red Hat “in connection with the merger”.
IBM welcomed the news.
“Together, IBM and Red Hat will be strongly positioned to lead in hybrid cloud, addressing growing demand for companies to securely move their business applications to an open, multicloud environment,” IBM said in a statement to WRAL TechWire.
“The approval by Red Hat shareholders for IBM to acquire Red Hat is an important step in the closing process for this acquisition, which we continue to expect will close in the second half of 2019.”
A Red Hat spokesperson declined to comment further, and said the firm wasn’t expected to issue any further statements until the deal was done.
Once the merger is finalized, Red Hat will become a wholly-owned subsidiary of IBM and its current shareholders will no longer own shares of Red Hat common stock.
Red Hat said in the proxy statement that it expects to delist its common stock from the New York Stock Exchange “as promptly as practicable after the effective time and de-register its common stock under the Exchange Act as promptly as practicable after such a delisting”.