Dreamstime
shares were down sharply on Thursday after the cloud-based data storage provider announced a $500 million investment in the company by a group of investors led by the private-equity firm KKR. The investors will receive preferred shares in the deal.
Box (ticker: BOX) plans to use the proceeds to fund a $500 million buyback plan. The buyback will be in the form of a Dutch auction-style self tender after the company reports earnings in May.
The stock’s selloff reflects investor disappointment that Box has apparently decided not to sell the company. Last month, Box shares spiked on a Reuters report that the company had held talks with “interested parties, including other companies and private-equity firms.”
In February, Reuters had reported that the investment firm Starboard Value was considering launching a proxy fight for three Box board seats unless the company took steps to boost shareholder value. Adding three more seats would have given the activist investment firm effective control of the Box board. Starboard owns about 8% of Box.
Box said on Thursday that the
investment “will advance the company’s strategy to deliver the Box Content Cloud and enable customers to modernize how they work and drive digital transformation throughout their organizations.”
Box lead independent director
Dana Evan
said in a statement that “after undertaking a comprehensive review of a wide range of strategic options,” the company’s board “unanimously determined that continuing to execute Box’s long-term strategy in combination with a significant share repurchase and the support of KKR, is the optimal path to drive the company’s next phase of growth.”
Box CEO
Aaron Levie
said in a statement that the KKR investment is “a strong vote of confidence in our vision, strategy, and continued efforts to increase growth and profitability.”
Box said KKR’s head of American technology private equity, John Park, will join the company’s board, increasing its membership to 10. Box also said current director Bethany Meyer will become chairman of the board effective May 1.
Levie, who previously had been chairman, remains CEO and a board member. Meyer was added to the board last year as part of a standstill agreement with Starboard. Her elevation would suggest Starboard’s support for the new plan.
Box repeated its goal of growing revenue in the range of 12% to 16%, with operating margins between 23% and 27%, by fiscal 2024.
The preferred shares issued in the deal have a $27 strike price and a 3% coupon that can be paid in stock at the company’s discretion. On a converted basis, the preferred will represent about an 11% stake in Box.
The preferred can be converted into common at any time, and Box can require redemption after seven years. Box can require redemption after three years if the stock price hits certain thresholds.
In Thursday morning trading, Box was down 7.5%, to $22.45.
Write to eric.savitz@barrons.com
