Rackspace to Go Private in $4.3 Billion Deal

Cloud-computing provider Rackspace Hosting Inc. is being taken private by private-equity firm Apollo Global Management LLC for $4.3 billion.

The deal's per-share price of $32 represents a 38% premium over the company's stock price before The Wall Street Journal reported details of a potential transaction on Aug. 4. Rackspace' s stock rose 4.4% to $31.51 in morning trading in New York.

Rackspace provides cloud services to customers, allowing them to use remote servers for data storage and computing power. The company has shifted its business model in recent years from primarily running its own cloud-based serves in its 11 data centers to also helping to manage services from larger technology companies, such as Amazon.com Inc. and Microsoft Corp.

Rackspace said going private provides the company with more flexibility to take on shifts in customer demand.

"We are presented with a significant opportunity today as mainstream companies move their computing out of corporate data centers and into multicloud models," Chief Executive Taylor Rhodes said.

The deal is expected to close in the fourth quarter and is subject to antitrust-waiting periods in the U.S., EU and Israel; stockholder approval; and other closing conditions. The deal's value of $4.3 billion includes the assumption of $43 million in cash and the acquisition of performance-related equity awards.

As of December, Rackspace had 6,189 employees and annual revenue of $2 billion.

Write to Austen Hufford at [e-mail]

(END) Dow Jones Newswires

August 26, 2016 10:05 ET (14:05 GMT)

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