The deal will make IBM the world’s biggest hybrid cloud provider in a market that is valued at close to $1 trillion

IBM is to acquire open source cloud software pioneer Red Hat, in a deal worth $34 billion, the biggest acquisition in the US IT giant’s history.

“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.

“IBM will become the world’s number 1 hybrid cloud provider, offering companies the only open cloud solution that will unlock the full value of the cloud for their businesses," he added.

The acquisition will allow Red Hat to leverage enormous economies of scale and reach more customers across the globe, said the company’s CEO and president Jim Whitehurst.

"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," he said

IBM will pay $190 per share to acquire Red Hat, representing a 63 per cent premium of the company’s share price. Red Hat has seen exponential growth over the past 2 years, with revenues jumping 21 per cent in its last full year financial report.

Microsoft has identified cloud computing as a key area for growth in US and overseas markets, and its acquisition of Red Hat will leave it perfectly poised to capitalise on a whole range of business opportunities.  

“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,” said Rometty. 

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