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Rackspace ‘on brink’ of sale to private equity house – report

Reports suggest managed cloud company could be sold in a matter of days, ending its time as a publicly listed company

Rackspace is reportedly on the verge of becoming a privately owned entity, two years after its senior management abandoned plans to find a buyer for the managed cloud company.

According to a Wall Street Journal report, the company is in “advanced” takeover talks with one or more private equity houses, which sources claim could result in a deal some time this week.

News of the deal saw shares in the company initially rise by at least 18% before trading was suspended, prompting speculation about an imminent announcement on the company’s future.

Rackspace appointed financial services firms Morgan Stanley and Wilson Sonsini Goodrich & Rosato in May 2014 to help it field a series of undisclosed merger and acquisition offers.

An SEC filing at around that time confirmed that the company had been approached by multiple suitors interested in either partnering or acquiring it.

But in September 2014, Rackspace confirmed it had called off its efforts to find a buyer, and was committed to remaining independent.

“After a comprehensive review, the board decided to terminate M&A discussions,” the company said in a statement at the time.

“Based on Rackspace’s reaccelerated revenue growth and its potential trajectory for the coming year, the board concluded the company is best positioned to maximise shareholder value.”

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This change in strategy was linked to Rackspace’s decision to expand away from its roots as an infrastructure-as-a-service (IaaS) provider to become a purveyor of managed services, typically for enterprises with small IT teams that need help managing complex cloud environments.

To date, this approach has seen Rackspace put aside its differences with former IaaS adversaries Amazon Web Services (AWS) and Microsoft to offer support services to their cloud platforms.

Computer Weekly contacted Rackspace for comment on this story, but had not received a response at the time of publication.

Kate Hanaghan, research director at analyst house TechMarketView, said in a note to its subscriber base that Rackspace was in a precarious position when it came to fighting off competitive threats.

“Our concern for some time has been that Rackspace sits in the middle ground between the hyperscale providers on the one hand, and the established services providers on the other – having to fight off fierce competition from both,” said Hanaghan.

Read more on Infrastructure-as-a-Service (IaaS)

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