IBM is acquiring Red Hat for $34 billion, the companies said on Sunday. IBM intends to close the transaction through a combination of cash and debt. The acquisition has been approved by the boards of directors of both IBM and Red Hat, and is expected to close in the latter half of 2019.

Upon closing of the acquisition, Red Hat will join IBM’s Hybrid Cloud team as a distinct unit, says IBM. Red Hat will continue to be led by Jim Whitehurst, president and CEO of Red Hat, and Red Hat’s current management team. Mr. Whitehurst will join IBM’s senior management team, and report to IBM chief executive Ginni Rometty.

IBM says it intends to maintain Red Hat’s headquarters, facilities, brands and practices; and will continue to preserve the independence and neutrality of Red Hat’s open source development heritage and commitment, current product portfolio and go-to-market strategy, as well as its development culture. IBM and Red Hat will remain committed to the continued freedom of open source, via such efforts as Patent Promise, GPL Cooperation Commitment, the Open Invention Network and the LOT Network, the companies said.

“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.  “Most companies today are only 20 percent along their cloud journey, renting compute power to cut costs,” she said. “The next 80 percent is about unlocking real business value and driving growth. This is the next chapter of the cloud. It requires shifting business applications to hybrid cloud, extracting more data and optimizing every part of the business, from supply chains to sales.”

Jim Whitehurst, president and CEO, Red Hat, said, “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 –  all while preserving our unique culture and unwavering commitment to open source innovation.”

IBM’s and Red Hat’s partnership has spanned 20 years.

Find a copy of the email Red Hat president and CEO Jim Whitehurst sent out regarding the acquisition here: https://www.redhat.com/en/blog/red-hat-ibm-creating-leading-hybrid-cloud-provider?intcmp=701f2000000RWK7AAO

Read the blog post by Paul Cormier, executive vice president and president, Products and Technologies, Red Hat, here: https://www.redhat.com/en/blog/monumental-day-open-source-and-red-hat?intcmp=701f2000000RWKCAA4

[Image courtesy: IBM]