Rackspace sold to private equity house Apollo Global for $4.3bn

Rackspace has ended weeks of speculation about its future as a publicly traded company by confirming it will be acquired by private equity house Apollo Global Management for $4.3bn.

The managed cloud services company confirmed that the deal has won the unanimous approval of Rackspace’s board of directors, and it is now urging its shareholders to give the deal the green light.

Once shareholder support is secured, the company will still need to win regulatory approval for the transaction. Even so, Rackspace said it expected the deal to close some time in the fourth quarter of 2016.

The acquisition will put a end to Rackspace operating as a publicly traded company, which Graham Weston, its co-founder and chairman, said would allow the company to hone its managed cloud strategy behind closed doors.

“Our board, with the assistance of independent advisers, determined that this transaction, upon closing, will deliver immediate, significant and certain cash value to our stockholders,” he said.

“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 capitalise on our early leadership of the fast-growing managed cloud services industry.”

The company has spent the last two years repositioning itself as a purveyor of managed services for Amazon Web Services and Microsoft cloud customers, after seeing its attempts to go head-to-head with both firms in the public cloud space flounder.

According to its most recent financial results, this change in strategy has paid off. The company reported a 26% year-on-year rise in profit to $35m and a 7.2% increase in turnover to $524m during the second quarter.

During a conference call to discuss its financial results, Rackspace revealed plans to divest its non-core business units, including its web hosting organisation, Cloud Sites, as part of a wider efficiency savings push.

At the time, this was seen by many as a sign that the company might be preparing itself for a sale.

David Sambur, a partner at Apollo Global, said in a statement that the company was committed to advancing Rackspace’s managed services strategy.

“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,” he added.