Red Hat, Inc., the provider of open source solutions to the enterprise, announced that it has entered into a definitive agreement to acquire JBoss, the global leader in open source middleware. By acquiring JBoss, Red Hat expects to accelerate the shift to service-oriented architectures (SOA), by enabling the next generation of Web-enabled applications running on a low-cost, open source platform.


Red Hat will acquire JBoss for approximately $350 million in initial consideration, plus approximately $70 million subject to the achievement of certain future performance metrics. The transaction consideration is composed of approximately 40 percent in cash and 60 percent in Red Hat common stock. The acquisition is expected to be completed around the end of Red Hat's first fiscal quarter (May 2006), subject to customary closing conditions, including regulatory approval.

JBoss provides standards-based middleware solutions at a low cost, to enable mainstream customers to develop and deploy next-generation, service-enabled applications much sooner than previously expected. Paired with Red Hat's proven portfolio of enterprise solutions, Red Hat believes the combination, once consummated, will help to accelerate the shift to SOA by making powerful solutions available to developers and customers that seek to lower development and deployment costs.

Red Hat and JBoss are each committed to advancing open source software and its collaborative development model. The communities around Linux and JBoss prove that the open source development model creates quality software, while providing a flexible and lowest cost model for customers. This acquisition is expected to accelerate enterprise adoption of open source infrastructure, and broaden the entire market opportunity for existing and new Red Hat and JBoss partners who are building value-added enterprise solutions.

JBoss has modeled its business after Red Hat's proven subscription model - services and support, delivered through an online network. Red Hat provides established channels and global service delivery capability trusted by the enterprise. JBoss adds enterprise-proven middleware technology, community leadership, and a strong developer brand to Red Hat - a tight fit of business model and service delivery model. JBoss management chose Red Hat because it aligns to the vision of JBoss - delivering customer value by simplifying development, reducing cost barriers for adoption, and making it safe for use in mission-critical deployments by providing expert support services and advanced management tools.

Red Hat believes that the acquisition will be slightly dilutive to its quarter ending August 31, 2006, but neutral to earnings and cash flow for the full fiscal year. The transaction is expected to be accretive to both earnings and cash flow in the next fiscal year ending February 28, 2008.

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