International Business Machines Corporation (NYSE:IBM) entered into a definitive agreement to acquire Red Hat, Inc. (NYSE:RHT) from BlackRock, Inc. (NYSE:BLK), The Vanguard Group, Inc., Prudential Financial, Inc. (NYSE:PRU), T. Rowe Price Associates, Inc., FMR LLC, Greylock Partners and others for $34.6 billion on October 28, 2018. Under the terms, IBM will acquire all of the issued and outstanding common shares of Red Hat for $190 per share in cash. IBM intends to fund the transaction through a combination of cash and debt, which could include senior unsecured bridge loans. IBM has entered into a commitment letter dated as of October 28, 2018, with JPMorgan Chase Bank, N.A., Goldman Sachs Bank USA and Goldman Sachs Lending Partners LLC, pursuant to which IBM has obtained a 364-day senior unsecured bridge term loan facility in an aggregate principal amount of up to $20 billion to fund the consideration. At signing, IBM has ample cash, credit and bridge lines to secure the transaction financing. IBM plans to suspend its share repurchase program in 2020 and 2021 to help pay for the deal. Red Hat will operate as a wholly-owned subsidiary of International Business Machines. As on May 8, 2019, IBM is offering notes in amount of $19,847 million and intends to use the net proceeds from this offering, together with cash on hand, to finance the acquisition. As of May 15, 2019, IBM closed on, and received the net proceeds of, a multi-tranche debt offering in the total principal amount of $20 billion and notified the commitment parties of IBM's termination of all commitments under the commitment letter. Red Hat will operate as a distinct unit within IBM's Hybrid Cloud team. In case of termination of the transaction, Red Hat will pay a termination fee of $975 million.

Red Hat will continue to be led by its Chief Executive Officer Jim Whitehurst and current management team. Jim Whitehurst also will join IBM's senior management team and report to Ginni Rometty, Chairman of IBM. All 12,600 employees of Red Hat are to be acquired. IBM intends to maintain Red Hat's headquarters, facilities, brands and practices. The transaction is subject to Red Hat shareholder approval, regulatory approvals, the receipt of approvals or the expiration or termination of the applicable waiting periods, under certain antitrust laws including the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and clearance under Council Regulation 134/2004 of the European Union and other customary closing conditions. The transaction has been unanimously approved by the Boards of Directors of both IBM and Red Hat. As of January 2, 2019, proxy advisory firm Glass Lewis has recommended the shareholders of Red Hat to vote in favor of the transaction. As of January 16, 2019, Red Hat shareholders approved the transaction. As on May 3, 2019, the transaction was approved by Federal Trade Commission. As on May 7, 2019, the transaction was approved by Department of Justice. As of June 27, 2019, the transaction was approved by the European Commission. The transaction is expected to close in the second half of 2019. The acquisition will be free cash flow and gross margin accretive within 12 months.

Alex Stern, Ken Jacobs and John Gnuse of Lazard Ltd, Michael Carr and Colin Ryan of Goldman, Sachs & Co. and Jennifer Nason and Chris Ventresca of JPMorgan Chase & Co. acted as financial advisors to IBM. Andrew Decker, Eric Mendl and Jim Firenzy of Guggenheim Securities, LLC and Ed Liu, Anthony Armstong and Ankur Luther of Morgan Stanley & Co. LLC acted as the financial advisors for Red Hat and Howard L. Ellin, Clifford Aronson, Frederic Depoortere, Stuart Levi, Timothy F. Nelson, Regina Olshan, David Rievman, David Schwartz, Stephanie Teicher, Gavin White, Brandon Van Dyke, Rachel Arnett, Sam Cammer, Jonathan Berger, Jonathan Lee, Colin McVeigh, Sean Coburn, Timothy Nelson Ashley Romanias, Mike Sheerin, Michael Cardella, Jenna Skoller Cantor and Kim Franko Lower of Skadden, Arps, Slate, Meagher & Flom LLP acted as the legal advisors for Red Hat. Janet McDavid, Logan Breed, Ciara Kennedy-Loest Falk Schoening, Lesley Morphet and Rachel Brandenburger of Hogan Lovells LP and Scott A. Barshay, Steven J. Williams, John Kennedy, Kyle Seifried, Frances Mi, Lawrence Witdorchic, Jarrett Hoffman, Manuel Frey, Gregory Ezring, Caith Kushner, Jeffrey Samuels, Scott Sontag, Claudine Meredith-Goujon and Jonathan Ashtor of Paul, Weiss, Rifkind, Wharton & Garrison LLP acted as legal advisors for IBM. Jeffrey J. Rosen and William D. Regner of Debevoise & Plimpton LLP acted as legal advisors to Guggenheim and Morgan Stanley, who are financial advisors of Red Hat. Patrick Ryan, Adam Moss, Bill Brentani and Jay Higdon of Simpson Thacher advised J.P. Morgan and Goldman Sachs in Bridge Financing for IBM for the transaction. Computershare Limited acted as the transfer agent for Red Hat. Innisfree M&A Inc. acted as the information agent for Red Hat and will be paid a fee of approximately $50,000 and an additional success fee of $25,000 if the merger proposal is approved by stockholders of Red Hat plus expenses. Morgan Stanley will be paid fees of not less than approximately $43.3 million for its services, approximately $6.5 million of which was paid in connection with the delivery of the fairness opinion and approximately $36.8 million of which is contingent upon consummation of the merger. Guggenheim Securities will be paid fees of approximately $11.9 million that became payable upon delivery of Guggenheim Securities' opinion and which will be credited against the foregoing cash transaction fee. In addition, Red Hat has agreed to reimburse Guggenheim Securities for certain expenses and to indemnify Guggenheim Securities against certain liabilities arising out of its engagement. Paul Collins and Mike Laskey of Stikeman Elliott acted as legal advisor to IBM.

International Business Machines Corporation (NYSE:IBM) completed the acquisition of Red Hat, Inc. (NYSE:RHT) from BlackRock, Inc. (NYSE:BLK), The Vanguard Group, Inc., Prudential Financial, Inc. (NYSE:PRU), T. Rowe Price Associates, Inc., FMR LLC, Greylock Partners and others on July 9, 2019. In accordance with the terms of the Merger Agreement, and effective as of the Effective Time, each of Sohaib Abbasi, W. Steve Albrecht, Charlene T. Begley, Narendra K. Gupta, Kimberly L. Hammonds, William S. Kaiser, Kevin M. Murai, James M. Whitehurst and Alfred W. Zollar resigned from the board of directors of Red Hat. As on November 15, 2019, Brazil's Administrative Council of Economic Defense approved the transaction.