The deal is expected to close in the fourth quarter, and at that time Rackspace will be a privately held company.
Apollo agreed to pay about 6 percent above Rackspace’s stock closing price yesterday. The company’s stock jumped about 29 percent this month after reports circulated that Apollo was considering purchasing the cloud company.
Apollo Global will manage the transaction, but Searchlight Capital Partners will make an equity investment in the acquired company.
The acquisition isn’t surprising. In May 2014, Rackspace hired Morgan Stanley to explore “strategic alternatives” but nothing came of that partnership until now. At the time, Rackspace was facing increased competition from Amazon Web Services (AWS), Google, and Microsoft because those firms were able to offer cloud services for lower prices.
Since then, Rackspace altered its business model and partnered with AWS and Microsoft, making it easier for enterprise customers to set up private OpenStack clouds. In addition, earlier this month the company said it would make its managed security offering available on Azure.
Apollo Global is no stranger to the tech world. Last year, the company acquired IT consulting firm Presidio.