Apollo Global Management to acquire Rackspace Hosting in $4.3bn deal

BY Fraser Tennant

In a boost to its investments in the technology sector, private equity firm Apollo Global Management LLC has announced its intention to acquire cloud services provider Rackspace Hosting Inc in a deal with a total value of $4.3bn.

The definitive agreement, which will see Rackspace become a privately held company and its stockholders receive $32.00 per share in cash, also includes the assumption of $43m of net cash.

"We are tremendously excited about the opportunity for our managed funds to acquire Rackspace," said David Sambur, a partner at Apollo. "We have great respect for the company's talented employees and their commitment to deliver expertise and exceptional service for the world's leading cloud platforms.”

Founded in 1998, Rackspace provides businesses with expertise and exceptional customer service for the world's leading cloud platforms, including AWS, Microsoft and OpenStack (the open-source cloud platform that Rackspace co-founded in 2010, along with NASA). In 2015, the company reported revenue of $2bn.

Once completed, Rackspace expects the deal with Apollo to provide it with additional flexibility to deliver the multi-cloud services that its customers are looking for.

"This transaction is the result of diligent analysis and thoughtful strategic deliberations by our board over many months", commented Graham Weston, co-founder and chairman of the board of Rackspace. “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."

Having unanimously approved the agreement with Apollo, the Rackspace board of directors has recommended that Rackspace stockholders vote in favour of the transaction.

Recognising a significant opportunity, Taylor Rhodes, president and CEO of Rackspace, said: “We are presented with a significant opportunity today as mainstream companies move their computing out of corporate data centres and into multi-cloud models.

“Apollo and its partners take a patient, value-oriented approach to their funds' investments, and value our strategy and unique culture. This is an exciting transaction and we look forward to working closely together."

The Apollo/Rackspace transaction is expected to close in the fourth quarter of 2016 and is subject to applicable antitrust waiting periods, stockholder approval and other customary closing conditions.

News: Rackspace Confirms Its Sale to Apollo Global Management

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