Rackspace Signed Agreement to Acquire Datapipe

Rackspace US, Inc. signed an agreement to acquire Datapipe, Inc., provider of managed services across public and private clouds, managed hosting and colocation.

This acquisition, the largest in Rackspace history, brings new capabilities to the company and will enable the company to better serve customers of all kinds, globally and at scale.

According to industry surveys, the vast majority of companies operate across three or more clouds today, and will do so for years to come ( Bain IT Decision Maker Survey, May 2017). Customers have been asking Rackspace to expand its abilities in managing multiple clouds at scale, and with the acquisition of Datapipe, Rackspace will be able to meet this demand.

Among the new capabilities that Datapipe will bring to Rackspace are:
• Experience serving high-profile public sector customers, including the U.S. Departments of Defense, Energy, and Treasury, as well as the UK Cabinet Office, Ministry of Justice, and Department of Transport
• Professional services, software and tooling that will help better serve enterprise customers
• Data centers and offices in markets where Rackspace today has little or no presence, including the West Coast of the US, Brazil, mainland China, and Russia
• Traditional colocation services across four continents, to reduce cost and risk for customers moving applications out of their corporate data centers
• Managed services on the Alibaba Cloud (the largest in China)

By the same token, Rackspace brings new capabilities
to Datapipe customers, including:
• Experience in Microsoft, VMware, and OpenStack private clouds, including new service offerings for Azure Stack and VMware Cloud on AWS
• Managed Google Cloud Platform
• Managed services for enterprise applications, including those in the Oracle and SAP ecosystems, and those used in digital marketing and ecommerce

“Our customers are looking for help as they spread their applications across public and private clouds, managed hosting, and co-location, depending on the blend of performance, agility, control, security, and cost-efficiency they’re seeking,” said Joe Eazor, CEO, Rackspace. “With the acquisition of Datapipe, we’re very pleased to expand the multi-cloud managed services we provide our customers, while also opening doors to new opportunities across the globe.“

Founded in 2000, Datapipe is in managed public cloud services. It is a growing and profitable business, based in Jersey City, NJ, with 825 employees and 29 data centers in nine countries. It serves the complex needs of many large enterprises, including Johnson & Johnson, McDonalds and Rubbermaid.

“We are very proud of the business we have built and the innovations and successful customer outcomes we have been recognized for, and the future of Datapipe will be even brighter in combination with Rackspace,” said Robb Allen, founder and CEO, Datapipe. “Customers need guidance using public cloud infrastructure from Alibaba Cloud, Amazon Web Services, Google Cloud Platform, and Microsoft Azure. They also need help navigating the use of private clouds, managed hosting and colocation solutions, often in combination, as they move critical applications out of their corporate data centers. The combination of complementary capabilities and resources from both of our companies will create the world’s leading provider of multi-cloud managed services.”

Rackspace and Datapipe are similar. Both companies have been positioned as leaders in the Gartner Magic Quadrant assessments of providers of managed cloud services, and in industry rankings by Forrester and other analyst firms. They are known for their expertise and managed services across multiple clouds, customer service, profitable growth, and engaged workplace cultures. Rackspace intends to build on the leadership the two companies have established in reliability and support, to create a new level of end-to-end customer experience.

Pending regulatory approvals, Rackspace’s acquisition of Datapipe is expected to close in Q4 2017.

Rackspace will develop a comprehensive integration plan and will take care to maintain and enhance the customer outcomes that both companies are known for. It looks forward to welcoming the talented employees from Datapipe.

Both companies are privately held, with Rackspace owned by affiliates of certain funds of Apollo Global Management, LLC and certain co-investors.

The majority owner of Datapipe, Abry Partners, will receive equity in Rackspace.

Brian St. Jean, partner, Abry, described this transaction as “a measure of our confidence in the bright future of Rackspace when combined with Datapipe.”

No additional terms or details of the transaction will be publicly disclosed.

Citigroup, Inc. is acting as sole financial advisor to Rackspace in the transaction and has committed to provide incremental Senior Secured Credit Facilities, which will be used in part to refinance Datapipe’s existing indebtedness and pay related fees and expenses. Paul, Weiss, Rifkind, Wharton & Garrison LLP is acting as legal advisor to Rackspace.

Barclays and DH Capital are acting as financial advisors in the transaction to Datapipe. DLA Piper LLP is acting as legal advisor to Datapipe.