Rackspace Goes Private In $4.3B Acquisition Deal

Mon, 29th August 2016, 13:37

After offloading its 'Cloud Sites' hosting segment to Liquid Web earlier this month for an undisclosed sum, San Antonio-based Rackspace has announced its going private again after accepting a $4.3 billion cash offer (or $32 per share) from private equity firm Apollo Global Management.

Despite its early adoption and investment in the cloud sector, it became increasingly clear that Rackspace didn’t have deep enough pockets to compete with the likes of Amazon (AWS), Google and Microsoft in the cloud space. Rackspace has increasingly relied on helping enterprise clients shift their IT operations to the competition's cloud, then helping the companies manage their private and public cloud deployments.

Graham Weston, co-founder and chairman of the board of Rackspace commenting on the deal said:

This transaction is the result of diligent analysis and thoughtful strategic deliberations by our board over many months. Our board, with the assistance of independent advisors, determined that this transaction, upon closing, will deliver immediate, significant and certain cash value to our stockholders. We are also excited that this transaction will provide Rackspace with more flexibility to manage the business for long-term growth and enhance our product offerings. We are confident that as a private company, Rackspace will be best positioned to capitalize on our early leadership of the fast-growing managed cloud services industry.

For users the new ownership model will likely have little or no short term impact. The longer term prospects of not being beholden to ever increasing the value of stock prices may prove more positive, a sentiment seemingly echoed by President and CEO of Rackspace Taylor Rhodes who stated “Apollo and its partners take a patient, value-oriented approach to their funds' investments, and value Rackspace's strategy and unique culture”.

Rhodes also reiterated in a blog post that regardless their corporate structure, Rackspace’s unique culture and Fanatical Support have always been the keys to their success — and always will be.

Rackspace is a founding member in the open source OpenStack project, which gives users the building blocks for setting up their own private clouds. Rackspace went public in 2008. The deal is still subject to regulatory approval and is expected to close in the last quarter of this year.