Amazon is in the early stages of a plan to invest in Rackspace Technology. People close to the deal said that the agreement would involve Amazon acquiring a minority stake in Rackspace. Rackspace is in the business of helping companies migrate to the cloud.
The deal could be a great way to solidify the ties between the two companies. Rackspace also does cloud migrations for companies that want to use other cloud services like Microsoft Azure, VMware, and Google Cloud.
Currently, the deal is still not solid enough to say for sure that it will go through.
An immediate response from the market
Rackspace is majority-owned by Apollo Global Management. There is no clear indication about whether they will accept the terms of the deal as put forth by Amazon. If there is a deal there, it could take a month or two to negotiate fully and reach an agreement that works for both companies.
Both Apollo and Amazon have made no official statements or responded to queries about the deal. After the news broke out, Rackspace shares went up by 17%.
If Rackspace brings in Amazon to invest, it would be the second company under the Apollo umbrella to seal a deal with a major tech company. Google took a 6.6% stake in ADT for $450 million.
AWS is thriving
Rackspace leases server space and helps corporations move data to the storage. Apollo acquired the company in 2016 for $4.3 billion in a leveraged buyout. They were listed in the stock exchange in August 2020.
Rackspace operates out of San Antonio, Texas, and has a market cap of more than $3 billion. That is almost as much as their debt.
Amazon is currently seeing unprecedented growth, forced by a response to the pandemic. More companies are moving to the cloud, using Amazon Web Services. The data storage and computing power sales rose by 29% in Q2, bringing in $10.81 billion in revenue.