Rackspace may get acquired by telecom CenturyLink

In an odd turn of events, major web hosting company Rackspace is allegedly in negotiations to sell itself to Louisiana-based telecommunications firm CenturyLink.

The news, first reported by Bloomberg earlier today, wouldn’t be a complete shock if true. Rackspace first notified shareholders that it was interested in selling the company back in May, which actually had a negative effect on its stock price, as VentureBeat previously reported.

Rackspace declined comment to VentureBeat about any such acquisition negotiations.

Part of the stock downturn has to do with major potential buyers like IBM showing no interest in an acquisition. Also, few analysts believed the company would take itself private to avoid scrutiny by shareholders as Rackspace attempts to shift away from the commodity public-cloud business to focus instead on its support and managed services.

CenturyLink doesn’t have a strong background in cloud computing and cloud services, so its interests in Rackspace are valid. Bloomberg’s sources also indicate that expanding its cloud services is a main reason for CenturyLink’s interest.

Based on its current stock price, Rackspace has a $5.33 billion valuation. That said, it might be difficult for CenturyLink to come up with the kind of money needed to push the acquisition deal through.