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KKR agreed to invest $500 million in Box (NYSE: BOX), a Silicon Valley cloud content management company that plans to use most of the proceeds for a stock buyback.
Why it matters: This feels like protection money, as Box has been under reported pressure from activist investor Starboard Value, which is Box's largest outside shareholder. Not only does Box now have a new deep-pocketed investor in its corner, but Starboard has a path to exit at a profit.
Details: KKR will receive convertible preferred stock and a new seat on Box's board of directors. The buyback will be done via a Dutch auction-style self-tender worth up to $500 million, with specific details and launch to come after Box's fiscal Q1 earnings report next month.
- Investor reactions: Box stock fell on the news, because this almost certainly means a sale process isn't in the cards.
The bottom line: "Demand for secure file-sharing services online has skyrocketed since the onset of COVID-19, driven by the information technology needs of companies whose employees are working from home," Reuters' Greg Roumeliotis writes.
- "While Box has benefited from this trend, it has struggled to fully capitalize on it, as some of its services and products are offered by competitors either for free or at a lower cost."