Rackspace Hosting, Inc. (NYSE:RAX) could take itself private. Citing an unnamed source, TechCrunch reports that the company has been in negotiations with a private-equity firm to secure the capital necessary to complete the deal. Rackspace is said to be planning to make an announcement about it very soon—possibly even this week.
Rackspace explores possibilities
There have been plenty of rumors about what Rackspace might do next. In May, the company’s stock soared as investors speculated that a bigger company might buy it out. Rackspace said at that time that it had retained bankers to look into strategic options like an acquisition or partnership. Going private is a third possibility that hasn’t been talked about much. Dell Inc. Did the same last year in order to get out from under Wall Street’s scrutiny so that it could execute a turnaround strategy.
The cloud services provider has been up against tech behemoths like Amazon.com, Inc. (NASDAQ:AMZN)’s Amazon Web Services, Google Inc (NASDAQ:GOOGL) (NASDAQ:GOOG)’s plethora of cloud offerings, and Microsoft Corporation (NASDAQ:MSFT)’s newer offerings.
Too much pressure for Rackspace
TechCrunch reports that one of their sources at Rackspace said, “The pressures of being a public company are too much.” Another source reportedly told the website that the idea of going private is beginning to gain “sufficient traction” among board members.
A spokesperson for the company said they don’t comment on speculations or rumors. However, the company’s regulatory filings do suggest that going private might indeed be an option. The company included the phrase “other alternatives which could advance Rackspace’s long-term strategy” in the filing it submitted to the Securities and Exchange Commission in May.
Rackspace received offers
Sources also told TechCrunch that Rackspace is considering going private even though it has already received at least three bids to acquire it. Hewlett-Packard Company (NYSE:HPQ) and International Business Machines Corp. (NYSE:IBM) are said to have made two of the offers. HP reportedly offered up to $43 per share. That represents a fairly good premium, as last night the company’s stock closed at less than $34 per share. Any premium calculated would be based on the price before these rumors came out. The company’s market capitalization was at around $4.8 billion last night, and this offer would value Rackspace at more than $6 billion.
The website’s source claims that the offer from IBM fell through.