Mubasher: IBM agreed to acquire US open source cloud software company Red Hat for around $34 billion, including debt.

IBM, which has a market capitalisation of $114 billion, would pay $190 per share in cash, a premium of 63% to Friday’s closing Red Hat share price, the companies announced in a joint statement on Sunday.

IBM would maintain and further enhance Red Hat’s partnerships with major cloud providers, including Amazon Web Services, Microsoft Azure, Google Cloud, Alibaba.

The open source software maker would become a distinct and independent division of IBM’s Hybrid Cloud unit, with its CEO Jim Whitehurst’s joining the top management team and reporting to CEO Ginni Rometty.

This is the biggest transaction so far, as the US tech giant seeks to diversify its technology hardware and consulting business into higher-margin products and services.

“IBM will become the world's #1 hybrid cloud provider, offering companies the only open cloud solution that will unlock the full value of the cloud for their businesses,” Rometty said.

The acquisition mirrors Rometty’s push to expand the company’s subscription-based software products, as software sales slowed down and demand for mainframe servers faded.

 “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,” Whitehurst said.