Rackspace Sells to Apollo Global for $4.3 Billion

Ending weeks of speculation, San Antonio-based Rackspace Hosting Inc. said Friday that it's being acquired by New York private equity firm Apollo Global Management LLC in a deal valued at $4.3 billion.

"This transaction will provide Rackspace with more flexibility to manage the business for long-term growth and enhance our product offerings," Chairman and co-founder Graham Weston said in a statement. "We are confident that as a private company, Rackspace will be best positioned to capitalize on our early leadership of the fast-growing managed cloud services industry."

Weston said the deal, which will cash out all investors at $32 a share and take the cloud computing company private, came after months of deliberations and will "deliver immediate, significant and certain cash value to our stockholders."

The deal represents a 38 percent premium to Rackspace's closing price on August 3, before a Wall Street Journal report about the potential sale boosted share prices. The stock has risen about 30 percent since the news about a potential sale.

"We are presented with a significant opportunity today as mainstream companies move their computing out of corporate data centers and into multi-cloud models," Taylor Rhodes, president and CEO of Rackspace, said in the statement. "Apollo and its partners take a patient, value-oriented approach to their funds' investments, and value Rackspace's strategy and unique culture."

The sale to Apollo funds is expected to close in the fourth quarter.

David Sambur, a partner at Apollo, said the private equity firm respects the company's employees and "their commitment to deliver expertise and exceptional service for the world's leading cloud platforms. We look forward to working with Taylor and the entire management team and Searchlight to help advance Rackspace's strategy and continue the company's strong heritage of innovation."

Apollo is known as a seasoned corporate turnaround player, breathing new life into faltering companies like Hostess...

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