Rackspace Mulling Prospects Of Going Private: Reports

By RTT News, 
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(RTTNews.com) - Cloud service provider Rackspace Hosting Inc (RAX) is in talks with a private equity firm to go private, according to a report from TechCrunch. Shares of Rackspace gained six percent on the NYSE, following the news.

Rackspace is in negotiations with a private investment firm to fund the deal and might make an official announcement as soon as this week, TechCrunch reported.

In May, Rackspace had been under spotlight after it hired Morgan Stanley to explore strategic options, and being approached by multiple parties for partnership and acquisitions.

According to the report, Rackspace intentions to go private has come amidst three acquisition bids, including proposals from Hewlett-Packard Co. and IBM. HP has offered to buy Rackspace for up to $43 a share, valuing the company at $6 billion, the blog quoting unnamed sources. Rackspace shares are currently trading at $35.97 a share, giving the company a market value of about $5.1 billion.

Other potential buyers or partners include CenturyLink, Cisco, Dell, and EMC Corp.

Rackspace Hosting provides cloud computing services and managing Web-based IT systems for small and medium-sized businesses and large enterprises worldwide. The company has been able to generate revenue growth on the back of customer additions, but has had to grapple with higher costs due to strong competition from peers like Google and Amazon.

RAX is currently trading at $35.95, up $2.20 or 6.52%, on a volume of 5.6 million shares, above the three-month average volume.

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