Searchlight taps Fund II to invest in Apollo’s Rackspace take-private

  • Buyout follows Harbortouch Payments and 160over90
  • Co-founder of Searchlight worked at Apollo
  • Searchlight closed sophomore fund at $1.9 bln in December

Searchlight Capital Partners teamed up with Apollo Global Management in the $4.3 billion take-private deal for tech company Rackspace.

Searchlight Capital said it would make a strategic investment in Apollo’s all-cash offer of $32 a share for Rackspace, well above the stock’s trading level in the mid-$20s prior to acquisition rumors that surfaced in August.

Rackspace shares have skidded since early 2015 when the stock traded in the $40s. The company agreed to the buyout offer on Aug. 26.

Searchlight Capital’s co-founder, Eric Zinterhofer, for many years was co-head of media and telecom at Apollo. He focuses on U.S. dealmaking for Searchlight, which has offices in New York, London and Toronto.

Beyond a prepared statement, the firms declined to elaborate on how the deal came about.

Searchlight Capital has already gobbled up investments in Harbortouch Payments LLC and 160over90 through Fund II in recent months. Its investment in Roots, a Canadian athletic-wear apparel retailer, marked its first deal from Fund II late last year.

Zinterhofer co-founded Searchlight Capital in 2010, along with Oliver Haarmann and Erol Uzumeri.

Among the LPs in Searchlight Capital Fund II, Florida State Board of Administration committed $100 million to the pool in the fourth quarter.

The firm has yet to announce any significant exits from Fund I, which closed on $860 million in 2012. At last check, the firm listed 13 portfolio companies on its website.

Action Item: Rackspace stock chart:

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