Cloud services provider Rackspace Hosting Inc said it agreed to be taken private by Apollo Global Management LLC in a deal valued at $4.3 billion, as the private-equity firm boosts its investments in the technology sector.
Rackspace’s shares were up 4.3 percent at $31.50 in early trading on Friday, just shy of Apollo’s offer of $32 per share.
The offer represents a premium of 38.2 percent to Rackspace’s closing price on August 3, the day before reports that the company was in advanced talks with PE firms for a go-private deal.
Reuters reported earlier this month that Rackspace was in talks with Apollo.
As part of the deal, expected to close in the fourth quarter, private-equity firm Searchlight Capital Partners will also make an investment in Rackspace.
Apollo, with $186 billion in assets, has been looking to step up its investments in technology.
Affiliates of the firm in July agreed to take Outerwall Inc , the owner of Redbox video rental kiosks, private in a deal valued at about $1.6 billion.
Rackspace, which leases server space and helps corporations store and access data in the cloud, has focused on growing its cloud business amid rising competition from established players such as Microsoft Corp and IBM Corp and startups.
Rackspace has explored a sale several times since it announced it was working with Morgan Stanley to explore strategic alternatives two years ago.
Citigroup, Deutsche Bank, Barclays and RBC Capital Markets, LLC are Apollo’s financial advisers, while Goldman Sachs & Co advised Rackspace.
Morgan Stanley also provided services in connection with the deal.
Citigroup, Deutsche Bank, Barclays and Royal Bank of Canada are providing financing for the deal.
Paul, Weiss, Rifkind and Wharton & Garrison LLP are legal advisers to Apollo while Wilson Sonsini Goodrich & Rosati is Rackspace’s legal adviser.
(Reporting by Narottam Medhora in Bengaluru; Editing by Sriraj Kalluvila)