Rackspace Hosting, Inc. (RAX) Jumps on Apollo Buyout

Rackspace Hosting, Inc. (NYSE:RAX) stock trading was halted Friday morning amid “news pending.” That news is expected to be the official announcement that Rackspace has agreed to a buyout offer from Apollo Global Management LLC (NYSE:APO).

Rackspace Hosting, Inc. (RAX)A report out Friday said that Apollo would buy Rackspace for $4.3 billion. That would come out to $32 per share of RAX stock, about 6% better than Friday’s closing price. According to that report, Rackspace expects the deal to close in the fourth quarter.

Reuters then confirmed the news shortly before Friday’s bell.

The news comes just weeks after a Wall Street Journal report that said the cloud computing firm was “nearing a sale to a private-equity firm.” The WSJ’s report at the time estimated that the buyout premium would value Rackspace “at as much as $4 billion.”

RAX started sniffing around a potential deal in 2014, when it hired bankers to examine buyout interest.

However, Rackspace didn’t acknowledge anything concerning a potential deal earlier this month when the company reported its second-quarter earnings. For the record, RAX earned an adjusted 38 cents per share on revenues that grew 7% to $524 million.

RAX stock, which spiked on reports that it might be bought out, slightly dipped after its Q2 report. While shares remained up 20% for the year, they’re still off 60% from their 2013 peaks, reflecting the company’s increased difficulties in fending off competitors such as Amazon.com, Inc.’s (NASDAQ:AMZN) Amazon Web Services.

The deal marks another tech buyout for Apollo, which acquired security company ADT earlier this year for $7 billion.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/08/rackspace-hosting-inc-rax-stock-apollo-global-buyout/.

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