IBM Sells $20 Billion In Bonds To Fund Red Hat Acquisition

Big Blue told the SEC it is terminating bridge loans from JPMorgan Chase and Goldman Sachs now that a large portion of funding for the $34 billion deal has been secured with new debt


IBM has informed federal regulators that it's secured $20 billion in funding it needs to execute its $34 billion Red Hat acquisition through a sale of bonds.

As such, Big Blue is terminating arrangements with JPMorgan Chase and Goldman Sachs for bridge loans provided by those financial institutions that were needed to secure the deal.

On Wednesday, IBM said that it "closed on, and received the net proceeds of, a multi-tranche debt offering in the total principal amount of $20 billion," the SEC form 8-K disclosure reads.

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[Related: 10 Acquisition Targets To Counter IBM's Red Hat Deal]

The latest bond sale brings IBM's total debt above $60 billion. IBM has said it will slow buybacks in 2020 and 2021 to pay down that debt.

IBM is buying the open-source software developer and longtime partner in a bid to become a market leader for hybrid cloud systems.

In January, Red Hat shareholders approved by an overwhelming margin the company's merger with IBM.

The two companies announced the deal in November of last year that stipulated IBM would acquire all issued and outstanding common shares of Red Hat for $190.00 per share—a significant premium above the $116.68 price at which Red Hat was trading at the time.