By Akanimo Sampson
Box, a concern that is powering how the world works together, has announced that private equity firm KKR is investing $500 million into it, a move that could help the struggling cloud content management vendor get out from under pressure from activist investor Starboard Value.
The company plans to use the proceeds in what is called a “Dutch auction” style sale to buy back shares from certain investors for the price determined by the auction, an activity that should take place after the company announces its next earnings report in May.
This will presumably involve buying out Starboard, which took a 7.5% stake in the company in 2019.
Last month Reuters reported that Starboard could be looking to take over a majority of the board seats when the company board meets in June. That could have set them up to take some action, most likely forcing a sale.
It has also announced that it has agreed to acquire e-signature startup SignRequest for $55 million. The acquisition gives the company a native signature component it has been lacking and opens up new workflows for the company.
With the cash, they will be able to stave off action from Starboard, and with KKR in the picture be able to take a longer-term view. Box CEO, Aaron Levie, sees the move as a vote of confidence from KKR in Box’s approach.
Levie said in a statement, “KKR is one of the world’s leading technology investors with a deep understanding of our market and a proven track record of partnering successfully with companies to create value and drive growth. With their support, we will be even better positioned to build on Box’s leadership in cloud content management as we continue to deliver value for our customers around the world.”
Under the terms of the deal, Head of Americas Technology Private Equity at KKR, John Park, will be joining the Box board of directors. The company also announced that independent board member Bethany Mayer will be appointed chairman of the board, effective on May 1.
Earlier this year, the company bought e-signature startup SignRequest, which could help open up a new set of workflows for the company as it tries to expand its market.
With KKR’s backing, it’s not unreasonable to expect that Box, which is cash flow positive, could be taking additional steps to expand the platform in the future.
Box stock was down more than 8% premarket, a signal that perhaps Wall Street isn’t thrilled with the announcement, but the cash influx should give Box some breathing room to reset and push forward.
Levie says the company has seen increased demand from customers to digitize more of their workflows, and this acquisition is about giving them a signature component right inside Box that will be known as Box Sign moving forward.
Insiders say with Box Sign, customers can have a seamless e-signature experience right where their content already lives.
While Box has partnerships with other e-signature vendors, this gives it one to call its own, one that will be built into Box starting this summer. As we have learned during this pandemic, the more work we can do remotely, the safer it is.
Even after the pandemic ends and we get back to more face-to-face interactions, being able to do things fully in the cloud and removing paper from the workflow will speed up everything.
“The massive push to remote work effectively instantly highlighted for every enterprise where their digital workflows were breaking down. And e-signature was a major part of that — too many industries still rely on paper-based processes”, he said.