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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): NOVEMBER 15, 1999
RED HAT, INC.
(Exact Name of Registrant as Specified in Charter)
DELAWARE 000-26281 06-1364380
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
2600 MERIDIAN PARKWAY
DURHAM, NORTH CAROLINA 27713
(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code: 919-547-0012
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ITEM 5. OTHER EVENTS.
On November 15, 1999, Red Hat, Inc. ("Red Hat") and Cygnus Solutions,
Inc., a privately held California corporation ("Cygnus"), announced that they
had entered into an Agreement and Plan of Reorganization dated as of November
15, 1999 (the "Merger Agreement") by and among Red Hat, Miami Acquisition Corp.,
a North Carolina corporation and wholly owned subsidiary of Red Hat ("Merger
Sub"), and Cygnus. In the merger (the "Merger"), Merger Sub will merge with and
into Cygnus, with Cygnus surviving the Merger as a wholly owned operating
subsidiary of Red Hat. The Merger, which has been approved by the Board of
Directors of each company, is subject to regulatory and Cygnus shareholder
approval and other customary conditions to closing. Certain affiliates of
Cygnus, representing more than a majority of the voting capital stock of Cygnus,
have agreed to vote in favor of the Merger.
Pursuant to the Merger Agreement, Red Hat will acquire Cygnus through
the issuance of an aggregate of 6,624,344 shares of Red Hat common stock (the
"Shares") in exchange for all of the outstanding shares of capital stock of
Cygnus and the assumption by Red Hat of all outstanding options to purchase
shares of capital stock of Cygnus. A portion of the Shares will be reserved for
issuance upon the exercise of such options. In accordance with the terms of the
Merger Agreement and an Escrow Agreement dated November 15, 1999 by and among
Red Hat, Cygnus, Merger Sub, First Union National Bank (as Escrow Agent) and
Michael Tiemann (as Securityholder Agent), ten percent of the Shares to be
issued and delivered at the closing in exchange for the outstanding shares of
capital stock of Cygnus will be placed in an escrow account to secure certain
indemnification obligations of Cygnus under the Merger Agreement.
The acquisition of Cygnus is intended to qualify a tax-free
reorganization under Section 368 of the Internal Revenue Code of 1986, as
amended. Red Hat will account for the transaction as a pooling-of-interests.
Red Hat's press release announcing this transaction is filed as Exhibit
99.1 hereto.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) EXHIBITS.
EXHIBIT NO. DESCRIPTION
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99.1 Press Release of Red Hat, Inc. dated November 15, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this current report on Form 8-K to be signed on
its behalf by the undersigned hereunto duly authorized.
RED HAT, INC.
By: /S/ MATTHEW J. SZULIK
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Matthew J. Szulik
President and Chief Executive Officer
Dated: November 16, 1999
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
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99.1 Press Release of Red Hat, Inc. dated November 15, 1999.
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Exhibit 99.1
RED HAT TO ACQUIRE CYGNUS AND CREATE GLOBAL OPEN SOURCE POWERHOUSE
COMBINES WORLDWIDE MARKET AND TECHNOLOGY LEADERS TO FOCUS ON COMPLETE END-TO-END
SOLUTIONS FOR SERVERS AND HANDHELD DEVICES
RESEARCH TRIANGLE PARK, N.C. and SUNNYVALE, CA--November 15, 1999--Red Hat-R-,
Inc. (Nasdaq: RHAT), the market leader in open source solutions, and
privately-held Cygnus Solutions, today announced that they have signed a
definitive merger agreement, whereby Red Hat will acquire Cygnus in a
transaction valued at $674 million based on Red Hat's Friday, November 12
closing price. The merger will create an open source powerhouse to accelerate
and support the rapidly growing adoption of Red Hat Linux and open source
solutions in enterprise and Internet applications and a new generation of
post-PC-centric computing. Red Hat expects the merger to close by January 27,
2000.
The transaction will be completed in a stock for stock merger in which Red Hat
will issue up to 6,624,344 shares for all of the outstanding securities of
Cygnus. The transaction will be accounted for under the pooling of interests
method. The transaction is subject to approval by Cygnus' shareholders, the
expiration of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act and other customary closing conditions. Matthew Szulik, the
president of Red Hat, will lead the combined companies as president and CEO.
The merger will make Red Hat, Inc. the largest company in the world dedicated to
providing open source technology, information and services, offering the full
spectrum of open source software and support --- from enterprise deployments to
embedded and handheld platforms. End users worldwide will benefit from the
companies' combined, unmatched technical expertise and a wide-array of industry
partnerships with major computing vendors like Compaq, Dell, IBM, Intel and
Hewlett-Packard to support their rapidly-growing adoption of open source
solutions.
"Cygnus has enormous experience and technology leadership in software
development and embedded platforms," said Matthew Szulik, president of Red Hat,
Inc. "The merger will create a single, worldwide source that lets developers
rapidly create Linux applications for servers and small devices --- accelerating
the adoption of open source technologies in enterprises worldwide."
Red Hat, Inc. is the market leader in open source solutions, offering a
wide-array of consulting, training and support solutions for both its
award-winning Red Hat Linux operating systems (OS) software and popular open
source applications used by enterprises worldwide. Cygnus is an open source
software technology leader with software development tools and engineering
services and developer support for a variety of desktops, client/server systems,
real-time operating systems (RTOS) and embedded, post-PC centric platforms. The
combined entity will remain committed to serving the customers of each company.
"This merger will create a software company for the 21st century, spanning
powerful servers, Internet infrastructure and pervasive, post PC centric
computing platforms," said Alex Daly, president and CEO of Sunnyvale,
Calif.-based Cygnus Solutions. "Both Red Hat and Cygnus have vast engineering
and development expertise, successful and growing service offerings and two of
the most trusted and respected open source brands in the world."
International Data Corp. (IDC) research states that Linux was the
fastest-growing server operating environment in 1998, growing more than 190
percent in that year alone and capturing more than 15.8 percent of the 4.4
million revenue shipment server operating systems market segment. IDC also
states that Red Hat Linux is by far the most popular distribution, preferred by
68.7 percent of U.S. Linux users. Finally, IDC predicts that by 2002, there will
be more than 55 million handheld and notebook-style information appliance
devices and that by 2005, shipments of these appliances will exceed shipments of
PCs.
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ABOUT CYGNUS SOLUTIONS
Cygnus Solutions, a leader in open source software and an innovating force in
Internet software infrastructure, offers software development platforms based on
an open source model. Cygnus' award-winning products, custom engineering
services, and developer support services enable customers to bring products to
market faster at reduced system development costs. Cygnus development tools
cover more than 125 host-target combinations for embedded microprocessors and
are supported by one of the most experienced teams of engineers delivering
custom-engineering services and developer support to top companies worldwide.
Founded in 1989, Cygnus pioneered the commercialization of open source software.
Cygnus has been ranked on the Software Magazine's list of top 500 software
companies since 1997. The company has headquarters in Sunnyvale, California and
sales and engineering offices throughout North America, Japan, and the United
Kingdom.
ABOUT RED HAT, INC.
Founded in 1994, Red Hat (NASDAQ:RHAT) is the market leader in open source
operating system (OS) software, services and information. Along with its
award-winning open source Red Hat Linux OS, Red Hat offers a full line of
services, including telephone support, on-site consulting, developer training,
certification programs and priority access updates, making Red Hat a leading
resource for knowledgeable, innovative, mission-critical open source solutions.
Red Hat shares all of its software innovations freely with the open source
community under the GNU General Public License (GPL). The Official Red Hat Linux
OS and related services are available directly from the company and through its
partner, distributor and reseller programs, which include top PC and server
manufacturers such as Compaq, Dell, Gateway, IBM, Hewlett-Packard and Silicon
Graphics. Red Hat and the Official Red Hat Linux OS have received industry
praise. Recent accolades include: Red Herring's Top 100 Companies of the
Electronic Economy, Upside's Hot 100 Companies, Network World's 10 Companies to
Watch, Federal Computer Week's Government Best Buy, Software Development's Jolt
Award and InfoWorld's Product of the Year for three years in a row. Red Hat was
also voted a "LinuxWorld Favorite" by the attendees of the two most recent
LinuxWorld Expos, winning Best Server Distribution at the August show.
Red Hat is based in Research Triangle Park, N.C. and has offices worldwide.
Visit Red Hat on the Web at www.redhat.com. For investor inquiries, contact
Lippert/Heilshorn at (212) 838-3777.
LINUX is a trademark of Linus Torvalds. RED HAT is a registered trademark of Red
Hat, Inc. Cygnus is a registered trademark of Cygnus Solutions. All other names
and trademarks are the property of their respective owners.
FORWARD-LOOKING STATEMENTS
Forward-looking statements in this press release are made pursuant to the safe
harbor provisions of Section 21E of the Securities Exchange Act of 1934.
Investors are cautioned that statements in this press release that are not
strictly historical statements, including, without limitation, statements
regarding the combined operations of the two companies, management's plans and
objectives for future operations, and management's assessment of market factors,
constitute forward-looking statements which involve risks and uncertainties.
These risks and uncertainties include, without limitation, risks associated with
the difficulty of integrating the two companies, the potential failure to
achieve the beneficial synergies expected to result from the merger, Red Hat's
dependence upon an open source business model, reliance upon independent
third-party Linux developers, management of growth, reliance upon strategic
relationships, expansion of Red Hat's business focus and operations, the
possibility of undetected software errors, the enforceability of the GNU General
Public License and other licenses under which Red Hat's products are developed
and licensed, the scarcity of Linux-based applications, the risks of economic
downturns generally, and in Red Hat's industry specifically, the risks
associated with competition and competitive pricing pressures, the viability of
the Internet, year 2000 compliance efforts of Red Hat and of third parties on
which Red Hat depends, and other risks detailed in Red Hat's filings with the
Securities and Exchange Commission, copies of which may be accessed through the
SEC's web site at http://www.sec.gov.
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