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Is IBM Close to Completing Its Red Hat Acquisition?


May. 22 2019, Updated 1:20 p.m. ET

IBM-Red Hat deal awaits regulatory approval

IBM (IBM) is waiting for approval from European Union (EZU) antitrust regulators for its $34 billion potential acquisition of Red Hat. The deal already received US regulatory approval earlier this month without any conditions.

The European Union will likely give its decision on the IBM-Red Hat deal on June 27. The European Union can either approve the transaction with or without conditions or it can review the agreement. Both of the parties expect the deal to close in the second half of 2019.

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The deal

In October of 2018, IBM announced its largest-ever acquisition deal with Red Hat—the world’s leading provider of open source cloud software. The acquisition will likely help IBM expand into subscription-based software offerings. The acquisition would make IBM the world’s top hybrid cloud provider. IBM would help companies with an open cloud solution for their businesses. The acquisition would also help IBM catch up with Amazon and Microsoft.

The deal is expected to help revive IBM’s revenue growth, which has been declining on a year-over-year basis for three consecutive quarters.

Last week, IBM secured $20 billion through the sale of bonds to fund the Red Hat acquisition. The bond sale raised IBM’s total debt to over $60 billion. The company has decided to slow the pace of its share buybacks in the next two years to pay off its debt. IBM will continue to pay its dividend to shareholders.


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