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Rackspace Considers Going Private As Acquisition Speculation Fades

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Rackspace is considering taking the company private, according to a report by TechCrunch on Wednesday, an option that has gained “sufficient traction” among the company’s board.

An anonymous source has told TechCrunch that Rackspace has been negotiating with a private equity firm to borrow capital for the deal. Rackspace could make an official announcement as soon as this week, although that seems unlikely since there is a public holiday in the US on Friday. Rackspace has not commented on the deal as its policy doesn’t allow it to comment on rumors or speculation.

Rackspace shares are up 9.1 percent in premarket trade on Wednesday after the TechCrunch report.

Speculation around Rackspace’s potential buyers has run rampant since the company announced in May that it had hired Morgan Stanley to evaluate its M&A options. The announcement pushed its stock up 18 percent.

Most recently, Citigroup speculated that teleco CenturyLink would acquire Rackspace. Other analysts have thrown AT&T and Cisco Systems around as potential buyers, as well as IBM, Dell, and HP, which could use Rackspace to build out its OpenStack cloud services.

Rackspace shares fell 7.3 percent on Friday after DealReporter said that the company was not attracting interest from strategic buyers. Rackspace is at $33.36 with a market cap of just under $4.8 billion.

 

About the Author

Nicole Henderson is the Editor in Chief of the WHIR, where she covers daily news and features online. She has a bachelor of journalism from Ryerson University in Toronto. You can find her on Twitter @NicoleHenderson.

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