Apollo Global Management Acquires Managed Cloud Company Rackspace for $4.3 Billion
Rackspace, based in San Antonio, TX 78218, has been sold for a whopping $4.3 billion.
The Rackspace engages in the highly competitive cloud market. Like Amazon.com, Inc. (AMZN) and Microsoft Corp. (MSFT), Rackspace also emerged as the leaders. Though Rackspace recently secured deals with Microsoft and Amazon to offer consulting services, support, and management, its revenues continue to deplete.
By the end of the year, Rackspace is going to be privately owned by Apollo Global Management. Rackspace declared that the deal is estimated to close during the fourth quarter of 2016.
“They are not a technology company purchasing another technology company. This might be a financial organization which is in the business of building and supporting enterprises grow,” said John Engates, chief technology officer at Rackspace.
The $32 per share of Rackspace cash deal values it at around $4.3 billion. Rackspace investors are making out quite well at that depicted share price. This indicates a nearly 40% premium to the company’s stock value on the day prior to the rumors started to swirl.
This deal is imminent. Rackspace was near about to deal with Apollo and that the involved parties were considering a deal in the ballpark of $3.5 billion.
It is expected logical time for Rackspace to sell out and a better time for private equity to acquire the organization in a low-interest rate environment.
The ‘Rackers’ that are at San Antonio is going to stay in San Antonio.
“The local tech ecosystem owes its success to the presence of Rackspace, and it is that imminent strength of the industry that will permit Rackspace to expand [in San Antonio].”
Citing “people familiar with the matter” The Wall Street Journal launched an article asserting that Rackspace is in the state of advanced negotiations with few private equity organizations, and a deal is very close to being agreed upon. Reuters subsequently then published another article naming Apollo Global Management as the likely buyer.
The acquired party touted the advantages of being under Apollo Global Management’s wing. Rackspace quoted its Co-founder and Chairman Graham Weston announcing that the enterprise is “curious about this transition, this is going to provide Rackspace with more flexibility to control and manage the business for long-term growth and enhance product solutions.”, during its press release declaring the deal.
The Apollo Global deal is assumed to conclude in the fourth quarter. It has been unanimously considered and approved by Rackspace’s board of directors, however, remains subject to stockholder approval. This also needs the consent of regulatory bodies in certain decisive jurisdictions around the world.
Few Wall Street analysts are assuming a secret billion-dollar stock opportunity with this venture, powering brand-new gadgets and bringing revolution in the technology.