Shares of the cloud-computing company climbed more than 4 percent following the announcement.
Rackspace agreed to be acquired for $32 per share.
"We are presented with a significant opportunity today as mainstream companies move their computing out of corporate data centers and into multi-cloud models," Taylor Rhodes, president and CEO of Rackspace, said in a press release.
The offer represents a premium of 38 percent compared with Rackspace's closing stock price on August 3, 2016, the last trading day prior to reports speculating about a potential transaction.
Under the deal, funds managed by Searchlight Capital Partners will make an equity investment in the acquired company.
Rackspace's board of directors unanimously approved the transaction and recommends that stockholders vote in favor of the deal.
The company's stock has risen this year, up more than 24 percent.
RAX 2016 Chart
— Additional reporting by CNBC's Berkeley Lovelace