CBJ — The announcement of IBM’s $34 billion deal to buy Red Hat almost immediately drove shares almost 50% higher in the fast-growing software maker. Subsequently shares of IBM declined by about 2%.

IBM opted to pay a large premium as a means of avoiding potential challenger bids.

At $172, shares of Red Hat were trading around $18 short of the $190 price agreed by the two companies.

Red Hat has been investing heavily in tech tools that will make it easier for businesses to split up their computing work among a mix of data centers.

In buying Red Hat, IBM will have assembled a cloud that includes physical servers, its own operating system and human resource software applications.

The combined entity will also sell software that runs on its customers own hardware and other clouds. That will put it in direct competition with firms like Microsoft, which has a similar mix of software and cloud services.

Red Hat offers a standard version of Linux that runs on commonly available clouds as well as a business’s own data centres. There has been a noticeable upswing in customers running operating systems on public cloud servers over the past number of years.

@CanBizJournal