Rackspace enlists Morgan Stanley to explore possible acquisition

SAN FRANCISCO Thu May 15, 2014 5:45pm EDT

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SAN FRANCISCO (Reuters) - Cloud services provider Rackspace Hosting Inc (RAX.N) said it has hired Morgan Stanley to evaluate strategic options such as an acquisition of the company, triggering a late-session surge of more than 7 percent in its share price.

Rackspace, which leases server space and helps corporations store and access data in the cloud, has struggled to grow in the face of competition from aggressive startups as well as established players like Microsoft Corp (MSFT.O) and IBM (IBM.N).

"In recent months, Rackspace has been approached by multiple parties who have expressed interest in a strategic relationship with Rackspace, ranging from partnership to acquisition," the company said in a statement on Thursday.

"Our board decided to hire Morgan Stanley to evaluate the inbound strategic proposals, and to explore any other alternatives which could advance Rackspace's long-term strategy."

Rackspace stock, which has slid more than 20 percent this year, closed 7.1 percent higher at $30.68 on the New York Stock Exchange. The news was first reported by Bloomberg.

(Reporting by San Francisco Newsroom; editing by Matthew Lewis)

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