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Rackspace shares plummet after announcing no buyer found

Wed 17 Sep 2014

Rackspace shares plunged by more than 16% at close of play on Tuesday after the Texas-based cloud company announced that it was no longer interested in selling itself.

Rackspace has openly been considering a buyout strategy over the past four months, with many organisations showing an interest in partnership deals or acquiring the company as a whole.

Recent reports suggested that CenturyLink, a leading telecommunications provider, was considering buying Rackspace for more than $5bn. However, acquisition discussions have stumbled over the past week as the firms failed to reach an agreement on a final price.

Debra Peterson, a CenturyLink spokeswoman, refused to comment on Rackspace’s decision.

Earlier in May when Rackspace first revealed that it had been approached by “multiple parties”, the company shares rocketed by 17%.

However, Rackspace announced on Tuesday afternoon that “after a comprehensive review, the board decided to terminate M&A discussions.”

“We talked to a diverse group of interested parties and entertained different proposals. None of these proposals were deemed to have as much value as the expected value of our standalone plan,” Rackspace co-founder and chairman Graham Weston said in a statement.

It was also revealed that the organisation’s president Taylor Rhodes would be appointed as the new Rackspace CEO, replacing Weston who was holding the position temporarily.

“As a seven year leader of Rackspace, Taylor brings significant experience, dedication and passion to the role of CEO. He was instrumental in the development and execution of Rackspace’s managed cloud strategy that is now delivering strong results,” Weston said.

Although Rackspace may look for a future buyback of shares, for now it wants to retain cash to fund possible acquisitions deciding it didn’t want to take on debt, explained Weston.



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