Apollo Global to buy cloud services provider Rackspace in a $4.3-bn deal
27 August 2016
US private-equity firm Apollo Global Management yesterday struck a deal to buy Rackspace Hosting Inc in a deal valuing the cloud services provider at $4.3 billion.
Apollo Global is offering to pay $32 per-share, a premium of 38 per cent to Rackspace's closing stock price on 3 August 2016, the last trading day prior to news reports speculating about a potential transaction.
Apollo Global has received committed funding from Citigroup, Deutsche Bank, Barclays and Royal Bank of Canada. PSP Investments Credit USA has also committed to provide a portion of the financing.
The deal comes six months after Apollo Global acquired Florida-based home security company ADT Corp for $7 billion. (See: Apollo Global to buy home security company ADT Corp for $7 bn)
Founded in 1998, Texas-based Rackspace provides businesses with expertise 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).
It serves business customers in more than 120 countries, from offices and data centers on four continents.
Its customers include a majority of the enterprises on the Fortune 100 list and reported 2015 revenue of $2 billion.
Graham Weston, co-founder and chairman of the board of Rackspace, 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.''
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 centers and into multi-cloud models. Apollo and its partners take a patient, value-oriented approach to their funds' investments, and value Rackspace's strategy and unique culture.''