IBM is acquiring Red Hat, the Linux software provider, in a $34 billion deal. That’s a 63% premium above Friday’s closing price.

Red Hat is the leading provider of open source software and services for enterprise customers, focusing on cloud computing and Linux servers. In 2012, it became the first company providing open-source software to surpass $1 billion in revenue. The company’s revenue for Q2 fiscal 2018 was $823 million, up 14 percent year-over-year, according to results disclosed last September.

Red Hat will join IBM’s Hybrid Cloud division.

This deal can be a see a pricey but smart move for IBM to catch up in the Cloud and Enterprise software world. IBM, which has a market valuation of $114 billion, has seen revenue declined by almost a quarter since Rometty took the CEO role in 2012. While some of that has been from divestitures, most are from declining sales in existing hardware, software, and services offerings, as the company has struggled to compete with younger technology companies.

Read the official announcement >>