• International Business Machines (IBM) said on Wednesday it will buy HashiCorp in a deal valued at $6.4 billion. The deal is expected to close by the end of the year.
  • This acquisition will expand IBM’s cloud-based software products to tap into an AI-powered boom in demand.
  • IBM announced the deal as it reported first-quarter revenue below Wall Street’s estimates.

International Business Machines (IBM) agreed to buy cloud software company HashiCorp in a deal with an enterprise value of $6.4 billion, extending the tech company’s push into cloud and artificial intelligence as those offerings drive growth.

Details about the deal

IBM plans to acquire HashiCorp for $35 per share, which is 42.6% more than the closing price on Monday, giving the company access to HashiCorp’s roster of some 4,400 clients. After news of the deal talks leaked to the public on Tuesday, shares of HashiCorp saw a sharp increase.

There was talk of a deal between the two parties on Tuesday, according to the Wall Street Journal. HashiCorp’s stock shot up more than 25% before closing at roughly $29.15 on Tuesday. Before the report, the stock was trading at about $25.

HashiCorp, a San Francisco-based company, produces tools to assist users in setting up cloud infrastructure.

The acquisition is still pending shareholder and regulatory approval at HashiCorp. According to IBM, the largest shareholders of HashiCorp, who hold approximately 44% of the company’s voting power, have decided to vote every share they own in favour of the deal.

The deal is expected to close by the end of the year.

IBM revealed the agreement as it revealed first-quarter revenue that fell short of Wall Street forecasts. Reduced revenue from infrastructure was primarily offset by stronger growth in the company’s software segment, which includes AI products and automation software.

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Benefits to IBM

The acquisition is anticipated to increase revenue for IBM’s current business units, according to Chief Financial Officer Jim Kavanaugh in a statement. He said that IBM as a whole would benefit from HashiCorp’s already robust growth. Overall, the company is growing far more quickly, according to Kavanaugh. “You put that into IBM, and over time, it accelerates our growth.”

“For IBM, this is a wise transaction. They are acquiring a leader that enhances their current portfolio,” stated Stephen Elliot, a vice president at International Data Corp, a market research company.

IBM reported adjusted earnings of $1.68 per share for the quarter that ended in March, which was higher than the average estimate of $1.60 made by analysts.