Monday, 15 September 2014

CenturyLink said to have lined up financing for Rackspace; Hewlett-Packard also rumoured to be interested

Here's an interesting snippet about a fairly chunky US technology deal. I hear from excellent sources  CenturyLink, a landline phone service provider, has tapped up some US banks for a $6 billion financing package so that it can purchase cloud-computing services company Rackspace Hosting.

Rackspace specialises in providing cloud-computing services and, according to Bloomberg, hired Morgan Stanley to carry out a strategic review of the business earlier this year after Google and Amazon cut prices on competing products. Here are links to the original Bloomberg story and a follow up piece:

http://www.bloomberg.com/news/2014-05-15/rackspace-hires-morgan-stanley-to-evaluate-options.html

http://www.bloomberg.com/news/2014-09-07/centurylink-said-to-seek-to-acquire-rackspace-hosting.html

According to my sources, CenturyLink may be willing to offer up to $55 a share for Rackspace, whose current market capitalisation is about $5.5 billion.

CenturyLink, though, could face competition for Rackspace. My sources tell me Hewlett-Packard, which bought FTSE 100-listed Autonomy for $11 billion in 2011, has also been studying an acquisition of Rackspace despite protestations to the contrary last month.

If Hewlett-Packard does go for Rackspace then that would dampen recent speculation that the technology giant is about to bid for US cyber security company FireEye Inc. That rumour has been doing the rounds in European markets for several weeks but I am told Hewlett-Packard has no interest in the business.

I have asked Rackspace, CenturyLink and Hewlett-Packard for comment but so far have not heard back from any of the companies.

6 comments:

  1. What a load of crap (but I hope it is true)

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  2. Ben - Given that Rackspace pulled its off the market on Tue, any idea how your sources could have been so wrong about the CenturyLink buyout?

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  3. Unknown, as I said, it was a load of crap.

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