Service Provider Cloud

Is Cloud Provider Rackspace Going Private?

US cloud services provider Rackspace is on the verge of going private, with investment firm Apollo Global Management a leading candidate for the acquisition, according to reports.

Citing "people familiar with the matter," Reuters reported Friday that Apollo is negotiating to pay more than $3.5 billion. Rackspace announced two years ago that it was working with Morgan Stanley to "explore strategic alternatives" and "explored a sale several times" since then, Reuters reported.

The Wall Street Journal reported Thursday that one one or more unidentified private equity firms were in advanced talks to acquire Rackspace, and the deal might be reached this week (in other words, today).

"Apollo, a private equity and credit investment firm with $186 billion in assets, has traditionally invested in companies in the industrial, media, communications, consumer, retail, energy, services and healthcare sectors," Reuters says. However, it's branching out into tech, acquiring IT consulting company Presidio, last year.

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Founded in 1998, Rackspace pioneered the cloud, but has recently fought for customers in the shadow of much larger competitors, most notably Amazon Web Services Inc. and Microsoft Corp. (Nasdaq: MSFT) Azure. (See Amazon & Other 'Big 4' Cloud Providers Crushing Competitors.)

Rackspace has been a leader in developing and implementing OpenStack, contributing key source code to launch the project in partnership with NASA in 2010.

Rackspace had $2 billion in revenue last year. Its stock traded at $29.62, up 12%, on Friday morning.

Rackspace declined to comment. "We do not comment on rumors and speculation," a spokesperson said. Apollo Global Management has not responded to a request for comment.

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— Mitch Wagner, Follow me on TwitterVisit my LinkedIn profile, Editor, Light Reading Enterprise Cloud

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