Rackspace being sold to Apollo Global for 4.3 billion dollars

HalfEatenPie

The Irrational One
Retired Staff
Source: http://uk.businessinsider.com/apollo-is-buying-rackspace-in-a-43-billion-deal-2016-8

Apollo Global, a private-equity firm, has agreed to buy Rackspace in a $4.3 billion deal that would take the cloud-computing company private.


Rackspace will be acquired for $32 per share in cash, it said in a statement on Friday. That's a 38% premium to Rackspace's closing price on August 3, and 6% above the stock's closing price on Thursday. On August 3, reports surfaced that Rackspace was in talks to sell itself
More at the source.


Comments?  Thoughts?
 

webhostuk

New Member
Its my personal opinion, If cloud computing is a Boom I don't understand why the company was facing loss... and had to decide on selling the company. Why such a old and huge brand could not sustain the market pressure is the big question?
 

DomainBop

Dormant VPSB Pathogen
If cloud computing is a Boom I don't understand why the company was facing loss.
It wasn't facing a loss.  The company is very profitable and profits have been steadily rising, and analysts are forecasting an acceleration in growth rates:


Net income: 2013/$85 million, 2014/$107 million, 2015/$122 million.  Net income in Q2 2016 rose 28% from Q2 2015.


Revenues: 2013/$1.53 billion, 2014/$1.79 billion, 2015/$2.00 billion


Past 5 years growth: 10.9% annually, Forecast next 5 years: 16.9% annually 

...had to decide on selling the company. Why such a old and huge brand could not sustain the market pressure is the big question?
Short answer #1:  they're small compared to the two industry leaders AWS and Azure which also benefit from having very deep pocketed corporate parents.  Selling to Apollo will give them a parent who has money to invest in the business, and going private will let them focus more on the long term (as opposed to the next quarterly earnings release).


Short answer #2: they're a publicly traded company and so the #1 goal is increasing shareholder value.  Selling at a 38% premium is a nice pay day for shareholders.

Comments?  Thoughts?
It's about time.  Sale rumors have been swirling for the past few years, although I thought IBM would buy them.


I do think their focus on managed cloud services (and their recent divestiture of commodity businesses like Jungle Disk backup storage and Cloud Sites web hosting) puts them in a better position for future growth than cloud companies like DigitalOcean that are focused on the commodity IaaS side of the cloud biz.
 
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