Apollo takes Rackspace private in $4.3bn deal

Rackspace has entered into a definitive agreement to be acquired by a collection of funds to be managed by Apollo Global Management for $4.3 billion.

The deal has been in the rumour-mill for a few weeks, as the business has struggled at times to transition into the era of cloud computing. While Rackspace was previously one of the more well-known businesses during the pre-cloud era, it has seemingly struggled to keep up with AWS and Microsoft Azure transitioning into the managed service arena. Moving back into the private will give the team more freedom to focus on long-term ambitions and become more competitive.

“We are presented with a significant opportunity today as mainstream companies move their computing out of corporate data centres and into multi-cloud models,” said Taylor Rhodes, CEO of Rackspace. “Apollo and its partners take a patient, value-oriented approach to their funds’ investments, and value Rackspace’s strategy and unique culture. This is an exciting transaction for Rackspace and we look forward to working closely together.”

“We are tremendously excited about the opportunity for our managed funds to acquire Rackspace,” said David Sambur, 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. We look forward to working with Taylor and the entire management team and Searchlight to help advance Rackspace’s strategy and continue the company’s strong heritage of innovation.”

At the peak of its power, Rackspace shares prices traded at roughly $80, though the buy-out demonstrates the fall from grace, valuing the shares $32. This price does also represent a premium of 38% on closing stock prices on August 3, 2016.