Here’s how much Red Hat would have to pay to get out of the IBM deal
If Red Hat gets cold feet on its $34 billion acquisition by IBM, it could cost the Raleigh company nearly a billion dollars.
Red Hat, which sells open-source software and services, would have to pay IBM $975 million in cash if its agreement with IBM were to collapse and the company accepted a higher, competing offer, according to a Monday filing with the Securities and Exchange Commission. However, Red Hat is prohibited from soliciting or encouraging a competing takeover bid, the filling said.
The companies have until Oct. 28, 2019, to complete the merger — though that timeline could be extended, according to the filling. In a conference call with investors Monday morning, IBM CEO Ginni Rometty said IBM does “not see any regulatory inhibitors (to the merger). So, we are going to close as fast as possible.”
IBM’s takeover bid of Red Hat would be the largest acquisition in the company’s history, and the world’s second-largest technology deal ever, according to Bloomberg.
Shares of Red Hat climbed 45.4 percent to $169.63 per share by the end of trading on Monday. If the deal is completed, IBM would buy Red Hat for $190 per share.
IBM, which has a large campus in Research Triangle Park, saw its share price drop 4.1 percent to $119.64 per share at the end of trading.
In the investors conference call, Rometty said the deal was about resetting the cloud software landscape, in which IBM is currently competing with tech giants, such as Google, Microsoft and Amazon. The hybrid cloud — when companies use a mix of on-site, private and third-party public cloud services, such as Amazon’s AWS and Microsoft’s Azure — is an emerging $1 trillion opportunity that the companies want to be prepared for, Rometty said, according to the Associated Press.
“I want to keep repeating this is about resetting the cloud landscape, and we will be the undisputed number leader in hybrid-cloud,” Rometty said.
This story was originally published October 29, 2018 at 6:51 PM.