Rackspace Hosting Nears Sale to Private-Equity Firm

Rackspace Hosting Inc. is nearing a sale to a private-equity firm, two years after the cloud-computing company said it would explore a deal amid heightened competition in the fast-growing market.

The San Antonio-based company is in advanced talks with one or more private-equity firms, and a deal could be reached as soon as this week, according to people familiar with the matter.

Rackspace had a market value of $3 billion on Thursday afternoon before The Wall Street Journal reported on the possible sale, meaning that with a typical takeover premium, the company could be valued at as much as $4 billion.

Rackspace is a pioneer in the market for cloud services, which allow users to tap remote servers for storage and expanded computing power and have exploded amid the surge in mobile usage.

The company has transitioned its business model in recent years, amid stiff competition from web giants such as Amazon.com Inc. and Microsoft Corp. and is now more of a services provider offering bundled computing and support.

In 2014, the company said it had hired bankers to help evaluate expressions of interest. Later that year, Blue Harbour Group LP disclosed a sizable stake in Rackspace. Today, the activist investor is among the company's largest shareholders, with a stake of more than 9%.

--Matt Jarzemsky contributed to this article.

Write to David Benoit at [e-mail] and Dana Mattioli at [e-mail]

(END) Dow Jones Newswires

August 04, 2016 16:55 ET (20:55 GMT)

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