AWS 'in talks' to invest in Rackspace

Amazon Web Services (AWS) is reportedly in preliminary talks to invest in US-based cloud migration specialist Rackspace Technology.

The deal would see AWS acquire a minority stake in Rackspace, according to Reuters, which cites "sources familiar with the matter".

Rackspace helps firms migrate their data to the likes of AWS, Google, Microsoft, VMware and more. The firm is headquartered in Texas but has offices stationed around the world. According to recent estimations, the company is thought to be valued between $5 billion and $9 billion.

According to Reuters, the deal will have to be negotiated with Apollo Global Management, the parent company of Rackspace, but sources warned that there was no guarantee of an agreement, suggesting it could take months to hash out.

Shares in Rackspace have soared 15% based on the Reuters report, according to CNBC. It's claimed that trading was even briefly halted due to its volatility.

Rackspace leases server space and helps organisations store and access cloud services and data. Apollo acquired the firm in 2016, for a $4.3 billion leveraged buyout.

AWS, the market leader, has seen a boost from higher demand for cloud services as companies switch to virtual offices amid the coronavirus outbreak. Its revenues climbed almost 30% in the second quarter of 2020, hitting £10.81 billion.

If a deal is made, it would be the second Apollo-owned company to secure a deal with a major tech company in 2020. Earlier in August, Google purchased a 6.6% stake in ADT for $450 million; Apollo acquired ADT for nearly $7 billion in the same year it snapped up Rackspace. It's thought that Google is interested in the company's strong customer base and its security technicians as looks to drive sales of Nest devices.