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Red Hat Shareholders Greenlight $34B IBM Acquisition

Approval was nearly unanimous, as the deal moves toward expected completion in the second half of 2019.

Mitch Wagner

January 16, 2019

2 Min Read
Red Hat Shareholders Greenlight $34B IBM Acquisition

IBM's $34 billion deal to acquire Red Hat took a big step closer to completion, as Red Hat shareholders nearly unanimously approved the deal on Wednesday.

Some 99.5% of shareholders voted to approve the deal, with about 80% of shares casting votes, according to an SEC filing. That puts the deal on track to close in the second half of 2019, according to IBM Corp. (NYSE: IBM).

Figure 1:

Specifically, the plan calls for Red Hat Inc. (NYSE: RHT) to become a wholly owned subsidiary of IBM -- consistent with IBM's stated plan, when the deal was announced in October, for Red Hat to operate as a "distinct unit" within IBM's Hybrid Cloud Business Unit. That's important, because often in the case of acquisitions, the acquired company disappears into the parent. (See IBM Buying Red Hat for $34B, Turning Cloud Upside Down.)

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Additionally, shareholders approved a compensation plan for Red Hat executive officers in connection with the merger.

The Red Hat acquisition is potentially a big help to IBM's transition to the cloud era, which it has been struggling to do. In IBM's most recent earnings report, filed in October, cloud revenue was up 20%, to $19 billion, less than half the growth of the overall cloud market. Overall revenue was $18.8 billion, down 2%. (See IBM Is Losing the Cloud Race.)

With Red Hat, IBM is betting it can lead customers into the multi-cloud world, as enterprises use more than one cloud platform, as well as on-premises data centers, to run their business. IBM is also looking to Red Hat to infuse its open source culture throughout the company.

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About the Author(s)

Mitch Wagner

Executive Editor, Light Reading

San Diego-based Mitch Wagner is many things. As well as being "our guy" on the West Coast (of the US, not Scotland, or anywhere else with indifferent meteorological conditions), he's a husband (to his wife), dissatisfied Democrat, American (so he could be President some day), nonobservant Jew, and science fiction fan. Not necessarily in that order.

He's also one half of a special duo, along with Minnie, who is the co-habitor of the West Coast Bureau and Light Reading's primary chewer of sticks, though she is not the only one on the team who regularly munches on bark.

Wagner, whose previous positions include Editor-in-Chief at Internet Evolution and Executive Editor at InformationWeek, will be responsible for tracking and reporting on developments in Silicon Valley and other US West Coast hotspots of communications technology innovation.

Beats: Software-defined networking (SDN), network functions virtualization (NFV), IP networking, and colored foods (such as 'green rice').

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