The landmark acquisition of open source vendor Red Hat worth $34 billion has been approved unconditionally by the European Commission (EC).
The evaluation and approval process of the deal by the executive arm of Europe took just nine weeks to get completed.
There were a number of aspects of the deal that the EC had examined. That included whether this acquisition by IBM could bring down the capacity to compete for the rivals of IBM by degrading their interoperability with Red Hat Enterprise Linux.
The deal was approved earlier by the United States Department of Justice on May 7. The deal was put up for approval with the EC by IBM only on May 20.
“The Commission concluded that the merged entity would not have sufficient market power to shut out or marginalise its competitors by bundling or degrading interoperability” it said in a statement issued today.
A positive twist to the assessment by the anti trust regulators of EC by saying that “the Commission took note of the potential pro-competitive rationale of this acquisition.”
“This reflects, in particular, IBM’s intention to use the complementary capabilities of Red Hat to further develop and offer open hybrid cloud solutions,” it said. “This would increase choice for enterprise customers who could more easily shift workloads between on premise servers and multiple public and private clouds,” it further added.
The impact that the deal would potentially have on the markets for middleware and system infrastructure software were looked into and examined by the Commission during the processes of evaluating the fairness of the acquisition. The anti trust regulators of the European Union also noted that the new merged entity would “continue to face significant competition from other players in all potential markets”, and also added that “as the success of Red Hat significantly hinges on its neutrality, any strategy impairing this neutrality would likely damage Red Hat’s business.”
In May this year, bonds worth $20 billion were issued by IBM partly to generate enough funds for the acquisition. While both the companies expect the deal to be closed at the most by the third quarter of the current year and even as soon as July this year.
The estimates of analysts at Wall Street were comfortably beaten by Red Hat in terms of earnings when the company reported its last quarterly report before the deal is expected to close. The company managed to double its $5 million-plus deals as well as top secure a new cloud contract that was worth $15 million. The company also clocked revenues of $934 million
(Adapted from CBROnline.com)