​Rackspace takes rejigged cloud strategy private in $US4.3 billion deal

Tech giant takes cloud plans out of spotlight.

Taylor Rhodes - President and CEO, Rackspace

Taylor Rhodes - President and CEO, Rackspace

Rackspace has agreed to be taken private by Apollo Global Management in a deal valued at $US4.3 billion, as the tech giant takes its cloud act off the public stage.

Following two years of discussions with potential buyers, the cloud service provider has entered into a definitive agreement with the New York-based private equity firm, which boasts over $US186 billion in assets.

After scrapping plans to compete head-on with the market’s leading cloud vendors in Amazon and Microsoft, Rackspace now specialises selling services on the AWS and Azure platforms, adopting a “if you can’t beat them, join them” type mentality.

As reported by Goldman Sachs this week, the move has resulted in Rackspace increasing public cloud revenue by 11 percent year-on-year during the second quarter, on the coat-tails of strong AWS and Microsoft growth.

“We are presented with a significant opportunity today as mainstream companies move their computing out of corporate data centres and into multi-cloud models,” Rackspace president and CEO, Taylor Rhodes, said.

Rhodes said the transaction will provide Rackspace with more flexibility to manage the business for long-term growth, while enhancing the company’s product offerings in the process.

“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,” Rackspace co-founder and chairman, Graham Weston, added.

Westcon said the transaction is the result of “many months” of due diligence, with the transaction expected to deliver “immediate, significant and certain cash value” to stockholders.

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