Rackspace drops on BrightWire M&A report; CTL showed "casual" interest

|About: Rackspace Hosting, Inc. (RAX)|By:, SA News Editor

Rackspace (RAX -5.4%) has received "only modest buyer interest" since putting itself on the block, BrightWire reports. Shares have added to the Thursday losses they saw following a re/code report stating sources have denied H-P made a bid.

BrightWire states CenturyLink (CTL - unchanged) "made an initial overture" to buy Rackspace, but adds its interest "was only casual and soon faded." Citi made the case for a Rackspace/CenturyLink deal last month.

Separately, Wells Fargo's Gary Powell says talks make him consider a Rackspace LBO deal (would involve P-E firms) unlikely, and that the market has "correctly assumed" a 70%+ probability that no strategic buyer (i.e. a tech company) will emerge.

Nonetheless, Powell reiterates an Outperform, and calls  Rackspace's asset value under-appreciated. He adds CenturyLink and H-P "have not completely ruled out a potential deal with RAX."