RESEARCH TRIANGLE PARK – Is IBM’s $34 billion merger with Red Hat in trouble? Is it facing delays?
That’s the picture emerging from a variety of media reports in recent days, including comments from a senior IBM executive at a meeting in Europe where he said IBM would “potentially” acquired the Raleigh-based open source services and software giant is based.
However, a spokesperson for IBM said the deal is still progressing,
“Your story is wrong,” said Douglas Shelton. “As IBM has announced previously, we expect the deal to close in the second half of 2019.”
The deal was announced last October, and both companies have said they expect it to close sometime later this year, pending regulatory approval.
Red Hat shareholders recently approved the deal. Its shares traded Tuesday just short of its 52-week high of $183.54. IBM offered $190 a share for Red Hat.
However, two publications have said regulatory authorities are seeking more information.
DealReporter in the US has said that the Justice Department recently sent to IBM a second request for regulatory information.
Financial news website SeekingAlpha, citing the DealReporter news. said as of March 5 that the deal “still faces regulatory scrutiny on antitrust concerns.”
Regulators are apparently concerned about how a Red Hat-IBM merger might affect cloud computing.
IBM Chair and CEO Ginny Rometty has stated from the day the deal was announced that cloud computing is a key driver to the deal.
IBM issued a statement last week at that time saying the deal was still on.
“As IBM has announced previously, we expect the deal to close in the second half of 2019.”
Red Hat shareholders can expect windfall once IBM merger complete
Another merger and acquisition publication, CTFN, has said IBM has not sought formal approval for the deal in Europe.
“IBM is not likely to formally file for antitrust clearance from the European Commission for its acquisition of Red Hat this month, a person close to the situation said,” CTFN reported on Friday.
Concerns about the deal are not new.
In an analysis of the deal on Feb. 25, Manalo LLP cast doubt.
“From an antitrust perspective, the Red Hat-IBM transaction has presented a degree of complexity due to the parties’ long-standing vertical relationships,” the firm which focuses on mergers and acquisitions, noted.
“Red Hat and IBM are partners rather than competitors and work together on the open source Linux software platform. Regulators could probe whether IBM has an incentive to shift or reshape these vertical relationships in a manner which could be considered anti-competitive, for example, by halting the supply to competitors or degrading interoperability with competitors’ products. This potential for vertical effects is more likely to raise eyebrows with the European Competition Commission (EC) than the US Department of Justice (DoJ).”
Meanwhile, on Tuesday in Europe, David Simpson, Vice President, Cloud Services, cast more shadows over the deal.
“While discussing IBM’s future strategies, Simpson used the qualifier that IBM would ‘potentially’ acquire Red Hat, adding ‘acquiring Red Hat will, once we hopefully close it, add to our strategy,’” Computer Business Review, which also noted the Manalo assessment, reported.
Simpson was speaking at the Cloud Expo Europe in London.
Asked for more details, Simpson said: “I have given up trying to predict race horses, soccer games or football games and governments … We have stated that our intent is to try and close that acquisition through the regulators in this fiscal year.”
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