Apollo to buy Rackspace for $32 per share

Managed cloud company Rackspace has agreed to be acquired by funds affiliated with investment manager Apollo Global Management for $32 per share in cash.

The consideration represents a premium of 38% over the closing price on 3 August, which was the last trading day prior to news reports about potential deal.

The Rackspace board of directors has unanimously approved the agreement with the Apollo funds and recommended its shareholders vote in favour of the deal, which is expected to close in the fourth quarter of this year.

Co-founder and chairman Graham Weston said: “This transaction is the result of diligent analysis and thoughtful strategic deliberations by our board over many months. Our board, with the assistance of independent advisors, determined that this transaction, upon closing, will deliver immediate, significant and certain cash value to our stockholders.

“We are also excited that this transaction will provide Rackspace with more flexibility to manage the business for long-term growth and enhance our product offerings. We are confident that as a private company, Rackspace will be best positioned to capitalise on our early leadership of the fast-growing managed cloud services industry."

The transaction has a total value of $4.3bn, which includes the assumption of $43m of net cash. Rackspace will become a privately held company once the deal is done.

Rackspace shares were up 4.3% to $30.19 in pre-market trade.