Rackspace goes private in $5.7 billion buyout

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Rackspace goes private in $5.7 billion buyout

Hopes to be able to compete in tough cloud market.

Embattled hosting company Rackspace has gone private following a US$4.3 billion (A$5.7 billion) acquisition by American private equity firm Apollo Global.

Rackspace was taken over for US$32 per share in cash, a 6 percent bump on the firm's trading price at its close late last week when the deal was announced. Rackspace has a market capitalisation of just under US$4 billion.

The acquisition includes an undisclosed private equity investment by Searchlight Capital.

Rackspace said its board had approved the transaction. The deal is expected to close by the end of the year, pending approval by antitrust regulators.

Rumour of the takeover first surfaced earlier this month, several years after Rackspace indicated it was open to acquisition.

The managing hosting provider has shifted strategy in recent times to offer managed services to business users migrating to Amazon Web Services, Google Compute Engine, IBM Softlayer and Microsoft Azure in the face of strong competitive pressure from cloud infrastructure giants.

Rackspace co-founder Graham Weston said going private would give the company more flexibility to manage the business for long-term growth.

"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," he said in a statement.

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