data servers
"This transformation is likely to impact our revenue and margins for multiple quarters," Taylor Rhodes, Rackspace CEO, said. Picture: Servers for data storage are seen at Advania's Thor Data Center in Hafnarfjordur, Iceland August 7, 2015. [Representational image]REUTERS/Sigtryggur Ari

Rackspace, the US-based hybrid-cloud management company, was acquired by private equity firm Apollo Global Management LLC for $4.3 billion on Friday.

The PE firm has agreed to pay $32 per share in cash, a premium of 38 percent over the closing price of Rackspace, which stood at $23.16 apiece on Aug. 3, the last trading day of the hybrid cloud firm.

The deal, which is yet to get approval from shareholders and regulator, is expected to be closed in the fourth quarter of this fiscal, read the hybrid cloud company's official statement.

Apollo has agreed to retain Rackspace management, with the incumbent CEO, Taylor Rhodes, continuing to lead the team. After the acquisition, Rackspace, which went public in 2008, will become a private company again.

"Rackspace faces a big opportunity as the early leader in the fast-growing managed cloud services industry. To seize that opportunity, we want greater flexibility to invest our resources in additional multi-cloud capabilities that we expect to result in long-term growth. This transformation is likely to impact our revenue and margins for multiple quarters," Rhodes said.

The cloud services provider took advantage of the market post 2005 when IT companies were shifting their internal operations from on-premise data centres — which incurred heavy cost for companies as they managed the infrastructure themselves — to rented servers managed by third-party service providers.

Over the years, the company faced stiff competition from Amazon Web Services (AWS), Google's cloud offerings and Microsoft's Azure. In early 2013, Amazon undercut its cloud offerings seven times, which pulled down the share prices and revenues of Rackspace. The web-based computing services provider posted sales of $362.2 million in the first quarter of that year, which failed to beat analysts' estimates. The company's shares fell 25 percent to $39.36 following this move. Google, trying to keep up with its rivals, also cut its cloud services prices by 85 percent in 2014.

Rackspace, which could not match the scale and capital of bigger players, later changed its strategy by entering into managed services realm where it would help clients manage the company's private cloud as well as cloud deployments of AWS or Azure.

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