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Rackspace to acquire rival Datapipe in its biggest deal to date
Rackspace Inc. is taking a major step towards strengthening its position in the managed services market.
The company today announced plans to buy Datapipe Inc., a New Jersey-based competitor that launched in 1998 and has raised over $300 million from investors. The financial terms of the deal were not disclosed. However, Rackspace Chief Executive Officer Joe Eazor did share that it’s “the biggest acquisition by far” in his firm’s history.
The deal is set to buy the company 29 data centers along with valuable professional services expertise. Datapipe offers organizations assistance with managing their infrastructure, carries out cloud migrations and takes on certain cybersecurity projects as well. Its operations span several key regions where Rackspace currently has little or no presence.
The list includes the West Coast, Brazil, the U.K. and China, where Datapipe provides managed services for Alibaba Group Holding Ltd’s cloud platform. This part of the business could be particularly valuable to Rackspace given the size of the Chinese market.
An equally significant aspect of the deal are the customer accounts that Datapipe is bringing to the table. The firm works with large enterprises such as McDonald’s Corp. and Johnson & Johnson as well as a good number of public sector clients. The lineup includes the U.S. Departments of Defense, Energy and Treasury along with several British agencies.
In a way, the nature of Datapipe’s clientele may add to the value of its 29 data centers. Major cloud providers such as Amazon Web Services Inc. are luring companies away from traditional hosting platforms, which has led to market consolidation. Yet many large enterprises and government agencies aren’t in a hurry to move, mainly due to logistical factors such as the often prohibitive cost of carrying out a migration at their scale.
Rackspace expects to complete the acquisition of Datapipe in the fourth quarter. The combined company will reportedly have about 6,700 employees and generate over $2.4 billion in annual revenue.
Private equity firm Abry Partners, the majority owner of Datapipe, is set to receive an unspecified stake in Rackspace as part of the transaction. Rackspace was sold to Apollo Global Management LLC, another private equity fund, in a $4.3 billion deal earlier this year.
Image: Rackspace
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