IBM’s $37 Billion Acquisition of Red Hat

Paul, Weiss, Rifkind, Wharton & Garrison, Hogan Lovells, Skadden, Arps, Slate, Meagher & Flom, Debevoise & Plimpton and Simpson Thacher & Bartlett advised on the deal

IBM (NYSE: IBM) and Red Hat (NYSE: RHT), the world’s leading provider of open source cloud software, have reached a definitive agreement under which IBM will acquire all of the issued and outstanding common shares of Red Hat for $190.00 per share in cash, representing a total enterprise value of approximately $34 billion.

This acquisition brings together the best-in-class hybrid cloud providers and will enable companies to securely move all business applications to the cloud. Companies today are already using multiple clouds. However, research shows that 80 percent of business workloads have yet to move to the cloud, held back by the proprietary nature of today’s cloud market. This prevents portability of data and applications across multiple clouds, data security in a multi-cloud environment and consistent cloud management.

IBM and Red Hat will be strongly positioned to address this issue and accelerate hybrid multi-cloud adoption. Together, they will help clients create cloud-native business applications faster, drive greater portability and security of data and applications across multiple public and private clouds, all with consistent cloud management. In doing so, they will draw on their shared leadership in key technologies, such as Linux, containers, Kubernetes, multi-cloud management, and cloud management and automation.

IBM’s and Red Hat’s partnership has spanned 20 years, with IBM serving as an early supporter of Linux, collaborating with Red Hat to help develop and grow enterprise-grade Linux and more recently to bring enterprise Kubernetes and hybrid cloud solutions to customers. These innovations have become core technologies within IBM’s $19 billion hybrid cloud business. Between them, IBM and Red Hat have contributed more to the open source community than any other organization.

With this acquisition, IBM will remain committed to Red Hat’s open governance, open source contributions, participation in the open source community and development model, and fostering its widespread developer ecosystem. In addition, 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.

IBM and Red Hat also will continue to build and enhance Red Hat partnerships, including those with major cloud providers, such as Amazon Web Services, Microsoft Azure, Google Cloud, Alibaba and more, in addition to the IBM Cloud. At the same time, Red Hat will benefit from IBM’s hybrid cloud and enterprise IT scale in helping expand their open source technology portfolio to businesses globally.

Paul, Weiss advised International Business Machines Corp. with a team including Scott Barshay (Picture), Steven Williams, corporate partner John Kennedy and counsel Kyle Seifried and Frances Mi; employee benefits partner Lawrence Witdorchic and counsel Jarrett Hoffman; finance partners Manuel Frey and Gregory Ezring and counsel Caith Kushner; tax partners Jeffrey Samuels and Scott Sontag; and intellectual property partner Claudine Meredith-Goujon and counsel Jonathan Ashtor.

Hogan Lovells advised IBM on antitrust with a team including Logan Breed, Ciara Kennedy-Loest and Rachel Brandenburger.

Skadden advised Red Hat with a team including Howard Ellin, Brandon Van Dyke (M&A), Regina Olshan (Executive compensation and benefits), Clifford Aronson, Frederic Depoortere (Antitrust), Stephanie Teicher (banking), David Rievman, Gavin White (tax), Stuart Levi (IP&IT), David Schwartz (labor and employment) and Timothy Nelson (Benefits).

Debevoise advised Guggenheim and Morgan Stanley – acting as financial advisers for Red Hat – with Jeffrey Rosen, William Regner (M&A), Daniel Abuhoff and Erica Weisgerber (Dispute).

Simpson Thacher Represents JPMorgan and Goldman Sachs in Bridge Financing for IBM with a team including Patrick Ryan and Adam Moss (Banking and Credit); and Bill Brentani and Jay Higdon (Capital Markets).

 

Involved fees earner: Scott Barshay – Paul Weiss Rifkind Wharton & Garrison; Steven Williams – Paul Weiss Rifkind Wharton & Garrison; John Kennedy – Paul Weiss Rifkind Wharton & Garrison; Kyle Seifried – Paul Weiss Rifkind Wharton & Garrison; Frances Mi – Paul Weiss Rifkind Wharton & Garrison; Lawrence Witdorchic – Paul Weiss Rifkind Wharton & Garrison; Jarrett Hoffman – Paul Weiss Rifkind Wharton & Garrison; Manuel Frey – Paul Weiss Rifkind Wharton & Garrison; Gregory Ezring – Paul Weiss Rifkind Wharton & Garrison; Caith Kushner – Paul Weiss Rifkind Wharton & Garrison; Jeffrey Samuels – Paul Weiss Rifkind Wharton & Garrison; Scott Sontag – Paul Weiss Rifkind Wharton & Garrison; Claudine Meredith-Goujon – Paul Weiss Rifkind Wharton & Garrison; Jonathan Ashtor – Paul Weiss Rifkind Wharton & Garrison; Jeffrey Rosen – Debevoise & Plimpton; William Regner – Debevoise & Plimpton; Daniel Abuhoff – Debevoise & Plimpton; Erica Weisgerber – Debevoise & Plimpton; Patrick Ryan – Simpson Thacher & Bartlett; Adam Moss – Simpson Thacher & Bartlett; Jay Higdon – Simpson Thacher & Bartlett; William Brentani – Simpson Thacher & Bartlett; Logan Breed – Hogan Lovells; Ciara Kennedy-Loest – Hogan Lovells; Rachel Brandenburger – Hogan Lovells; Howard Ellin – Skadden Arps Slate Meager & Flom; Brandon Van Dyke – Skadden Arps Slate Meager & Flom; Regina Olshan – Skadden Arps Slate Meager & Flom; David Schwartz – Skadden Arps Slate Meager & Flom; Timothy Nelson – Skadden Arps Slate Meager & Flom; Clifford Aronson – Skadden Arps Slate Meager & Flom; Frederic Depoortere – Skadden Arps Slate Meager & Flom; Stephanie Teicher – Skadden Arps Slate Meager & Flom; David Rievman – Skadden Arps Slate Meager & Flom; Gavin White – Skadden Arps Slate Meager & Flom; Stuart Levi – Skadden Arps Slate Meager & Flom;

Law Firms: Paul Weiss Rifkind Wharton & Garrison; Debevoise & Plimpton; Simpson Thacher & Bartlett; Hogan Lovells; Skadden Arps Slate Meager & Flom;

Clients: Goldman, Sachs & Co.; Morgan Stanley; IBM; JPMorgan Chase & Co.; Guggenheim partners LLC; Red Hat Inc.;