Dive Brief:
- Cloud provider Rackspace announced Monday it signed an agreement to sell its Cloud Sites web hosting business unit to Liquid Web.
- The announcement was made during an earning’s call Monday, though the transaction actually took place last month, according to a Rackspace announcement. The deal is expected to close in the third quarter of 2016.
- Cloud and application hosting services provider Liquid Web has more than $90 million in annual revenue, according to an announcement. The acquisition will grow Liquid Web to approximately 550 employees with 30,000 global customers.
Dive Insight:
The sale to Liquid Web is part of a larger plan to divest services not core to Rackspace’s enterprise cloud strategy, according to the company.
Earlier this week, reports surfaced that Apollo Global Management LLC was considering a plan to buy Rackspace, which would take the company private. The cloud hosting provider has reportedly explored a sale several times in the past, so there is no certainty talks with Apollo will result in a deal. Rackspace CEO Taylor Rhodes did not comment on the Apollo rumors during a conference call to discuss Q2 results Monday, focusing instead on the sale to Liquid Web.
"What we’ve been able to do is find a strategic buyer in Liquid Web, who will buy the company at a higher multiple than it was producing for us and allow us to both focus our portfolio, as well as find a happy home for that business and help us raise some incremental funds," said Rhodes.
Rackspace has struggled in recent years. The earnings report released Monday confirmed continued slow growth, with revenue expanding just 7% in Q2 2016 over the same period last year.
