The talk of the market early on in the trading session this morning is Red Hat Inc (NYSE: RHT). The company hit center stage on the mainstream news outlets early this morning after it was announced that it would be acquired. Today, we’ll talk about:
- The acquisition;
- what we’re seeing from RHT stock as a result; and
- what we’ll be watching for ahead.
RHT To Be ACquired By IBM
As mentioned above, Red Hat is having an overwhelmingly strong start to the trading session this morning after news broke that the company will soon be acquired. Various reports are circling the story as IBM said on Suday that it would acquire RHT for a total price of $34 billion. The amount also includes the assumption of debt. On a per share basis, IBM has agreed to pay $190 in cash, bringing the premium on the deal to 63% over the company’s most recent closing price.
Ultimately, IBM is usin the acquisition as an opportunity to diversify its hardware and consulting business to create higher profit margins. Should the transaction go through, it will be the biggest acquisition that IBM has ever pulled off.
It’s important to keep in mind however that with big acquisitions like this one, there are a few things to think about. First and foremost, customary closing conditions must be met from the transaction to be finalized. Also, RHT and IBM together are a massive conglomerate, one that is going to need regulatory approval to happen. So, while the agreement is a definitive one, the deal is far from over.
What We’re Seeing From The Stock
With Red Hat becoming the biggest proposed acquisition that IBM has ever tried to move forward with, it comes as no surprise that investors are excited. After all, the company was already massive and had tremendous potential. Now, with the acquisition on the table at more than a 60% premium, investors are getting the return of value that they could only hope for in a couple of years, but it is happening over night. As is normally the case, our partners at Trade Ideas were the first to alert us to the gains. Currently (7:27), RHT is trading at $176.00 per share after a gain of $59.32 per share or 50.84% thus far today.
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What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on RHT. In particular, we’re interested in following the story surrounding the acquisition of the company and whether or not all of the ducks end up in the row that will make this happen. Nonetheless, we’ll keey an eye on the news and bring it to you as it breaks!
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