RESEARCH TRIANGLE PARK – IBM has closed its $34 billion acquisition of Red Hat, the tech giant announced Tuesday morning.
IBM’s acquisition of Red Hat, which was announced last October, is the biggest in the tech giant’s history. It also ranks as the second largest tech merger to date, trailing only Dell’s $67 billion buy of EMC four years ago.
The deal comes as IBM, while maintaining a large campus and several thousand employees in RTP, is not the Triangle behemoth it was earlier this decade. As Red Hat’s workforce grew steadily over the years to more than 13,000 the Triangle campus shrank to well under 10,000. Still, the impact on the Triangle will no doubt be huge as thousands of Red Hat workers begin receive paychecks from a new boss as well as cash -$190 for every share they own.
The deal also surpasses the previous largest corporate merger in North Carolina history – Duke Energy’s $30 billion-plus deal (including debt) for Progress Energy in 2012.
“Businesses are starting the next chapter of their digital reinventions, modernizing infrastructure and moving mission-critical workloads across private clouds and multiple clouds from multiple vendors,” said Ginni Rometty, IBM chairman, president and CEO.
“They need open, flexible technology to manage these hybrid multicloud environments. And they need partners they can trust to manage and secure these systems. IBM and Red Hat are uniquely suited to meet these needs. As the leading hybrid cloud provider, we will help clients forge the technology foundations of their business for decades to come.”
Rometty has stressed the importance of cloud computing and Red Hat’s strength in that market as a key driver for the deal. An analyst from research firm IDC echoed Rometty’s views.
“As organizations seek to increase their pace of innovation to stay competitive, they are looking to open source and a distributed cloud environment to enable a new wave of digital innovation that wasn’t possible before. Over the next five years, IDC expects enterprises to invest heavily in their journeys to the cloud, and innovation on it. A large and increasing portion of this investment will be on open hybrid and multicloud environments that enable them to move apps, data and workloads across different environments,” said Frank Gens, Senior Vice President and Chief Analyst at IDC, in the IBM announcement.
“With the acquisition of Red Hat, and IBM’s commitment to Red Hat’s independence, IBM is well positioned to help enterprises differentiate themselves in their industry by capitalizing on open source in this emerging hybrid and multicloud world.”
IBM and Red Hat announced the deal last October.
It has received regulatory approval in the US and European Union.
Red Hat will operate as a separate business group within IBM and continue to be led by CEO Jim Whitehurst.
Its headquarters will remain in Raleigh, IBM said.
Big Blue also operates a major campus in RTP and employs several thousand people across North Carolina.
“Red Hat will operate as a distinct unit within IBM and will be reported as part of IBM’s Cloud and Cognitive Software segment,” IBM said.
In the closing announcement, Whitehurst noted:
“When we talk to customers, their challenges are clear: They need to move faster and differentiate through technology. They want to build more collaborative cultures, and they need solutions that give them the flexibility to build and deploy any app or workload, anywhere.
“We think open source has become the de facto standard in technology because it enables these solutions. Joining forces with IBM gives Red Hat the opportunity to bring more open source innovation to an even broader range of organizations and will enable us to scale to meet the need for hybrid cloud solutions that deliver true choice and agility.”