Financing the acquisition of RedHat

The real question is how IBM is going to finance the $34 Billion acquisition of Red Hat?

IBM is getting $1.8 Billion from the software just sold to HCL. IBM has around $13 Billion of cash on hand, but they will probably use/spend only a fraction of it for the acquisition. For sure IBM will only want to borrow as little as possible to finance the acquisition. Is IBM going to raise some of the money by issuing new stock, doubtful. So, essentially something has to give... and IBM will end up selling more stuff, ie IBM Services which is today the combination of GBS + GTS. IBM has been moving the people they need from GTS to Systems the past few months to insure they have enough people to support the Cloud operations. All the rest will be sold off... hopefully at a high price though looking at the track record of IBM selling stuff, we can all wonder!!!

This was taken from another thread and reposted. OP by @WBkmcxT-3opk

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True

Again, to echo what someone else already said on this board, IBM will have to sell one or more of its divisions to raise the cash for the acquisition

Red Hat is 98% institutionally owned (think bankers and investors) and are loaning $20 billion from bankers to pay other bankers.

@1jqg, the article states that the $20 Billion is a bridge loan (364-day loan as a matter of fact). A bridge loan is interim short term financing until permanent financing can be found. IBM is not borrowing $20 Billion from these companies long term... It is just a loan until IBM can find a suitor for the stuff they are planning to sell. Again, to echo what someone else already said on this board, IBM will have to sell one or more of its divisions to raise the cash for the acquisition. The alternative is to issue stock/bonds or to borrow the money from a bank which is very unlikely based on that bridge loan it is taking.

IBM is borrowing $20B from JP Morgan and Goldman Sachs to help pay for the purchase. https://www.reuters.com/article/us-ibm-bridge/ibm-a-top-bridge-loan-borrower-with-red-hat-buy-idUSKCN1N66AF

Stock issuance and bonds. Not exactly breaking new ground here.

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Financing the acquisition of RedHat

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