San Antonio technology firm acquired for $1.9 billion

A Swedish company is acquiring Pathwire of San Antonio, a spin-off of Rackspace Technology that provides corporate email services, for $ 1.9 billion in cash and stock, the largest transaction of its kind in the technology industry the city has experienced since 2016.

Pathwire is also the fourth major company in the local information technology and cybersecurity sector to be bought out by companies outside of town in just over a year.

Pathwire has been bought by Sinch, one of the world’s largest providers of cloud communications services. It pays $ 925 million in cash and 51 million shares to Pathwire. The takeover should be completed by the end of the year.

Sinch is on the run. So far this year it has acquired two other companies – MessageMedia and Inteliquent – for a combined total of $ 2.44 billion.

Pathwire develops and markets products such as Mailgun, Mailchimp and Email on Acid to help companies better communicate with their customers. Based in downtown Weston Center, the company currently has 100,000 customers, including Microsoft and Lyft.

Pathwire was founded as a Mailgun in 2010 and was purchased by Rackspace in 2012 for an undisclosed price. In 2017, the company raised $ 50 million and parted ways with Rackpace, a cloud computing company.

Chicago-based private equity firm Thoma Bravo bought a majority stake in Pathwire in 2019.

Will Conway, CEO of Pathwire, led the company as general manager when it was part of Rackspace. This week’s acquisition shows the “downstream” impact of Rackspace’s 1998 launch in San Antonio, said David Heard, CEO of Tech Bloc’s local advocacy group.

“Rackspace is the gift that gives us time and time again,” he said. “It shows the power of profits like Rackspace that you can have these downstream profits like this for the local economy, which are great.”

Rackspace itself was bought by New York private equity firm Apollo Global Management for $ 4.3 billion in 2016. Rackspace began selling shares on the Nasdaq exchange in August 2020, its second initial public offering.

In July, the company announced it would cut 10 percent of its global workforce, or 700 of around 7,000 employees. Rackspace carried out at least half of the layoffs at its headquarters in Windcrest.

A $ 16 billion market

After Sinch completes the Pathwire acquisition, the email company will operate as a separate division, Sinch CEO Oscar Werner said in a conference call with equity analysts on Thursday.

Sinch said the global email delivery services market is valued at $ 16 billion.

“Every company in the world will be using email extensively,” said Werner. “That is the meaning of this channel.”

It is expensive and complicated for companies to build their own email and communication systems. As a result, companies use Pathwire products to manage customer contacts, plan and send emails for marketing campaigns, and format emails for different platforms.

“Trying to build an email service from scratch today will be almost impossible – extremely expensive,” said Werner. “And by the time you get there, all the other players will likely be four years ahead.”

Conway previously said that Pathwire, which employs 290 people, became profitable after separating from Rackspace. Pathwire is expected to generate $ 132 million in revenue and $ 104 million in gross income this year, Werner said during his presentation to analysts.