Today saw the end of the battle between Box and Starboard Value, its majority shareholder, for control of the board. Starboards' slate of directors defeated Box. This was the culmination of months of maneuvering by both sides in their struggle for control.
Box expressed appreciation for the results in a rather generic statement.
Box is grateful for the input and support we received from our stockholders during this transformation. The Board and management will continue to focus on transforming Box and executing Box' strategy to grow profitably while delivering significant value for all Box stockholders.
Starboard, on the other side, was not happy with the outcome, and did not hide it in a letter sent to shareholders earlier today.
We were disappointed with the election results. These were heavily skewed due to voting rights tied to preferred equity financing and stockholder capital being used aggressively to repurchase shares before the record date from stockholders who are likely to support change. The Boards have control of the future of Box, but there are still a lot of things to do. We have made many promises and we hope Box can fulfill them.
All this began when Starboard Value invested 7.5% in Box. This would later grow to 8.8%. It became the largest shareholder with that stake but it remained quiet until March 2013. This was when Starboard began to voice dissatisfaction with the company's direction. This conflict could have led to the resignation of Aaron Levie, founder and CEO of the company, or even the sale of Box.
Box made an interesting announcement that it would be taking a $500m investment from KKR. Starboard was not pleased with the move and published a letter at May's beginning requesting that significant changes take place. We wrote the following:
Although they wrote the letter in polite language, it is clear that Starboard is frustrated with Box. Starboard's letter stated that while we are grateful for the dialog we had with Boxs management and Board of Directors (the Board), we are becoming increasingly frustrated by continued poor results and questionable capital allocation decisions and subpar shareholder returns.
Starboard made an offer for board seats less than a week later and it was clear that the battle for control was underway. Two decent earnings reports before the vote strengthened Box's position. The company made the unusual move to deliver the results early to provide the information to voters.
Also, the company filed a document with SEC in which it criticized Starboards' list of candidates. Box prevailed in the end. Alan Pelz-Sharpe is the founder and principal analyst of Deep Analysis. He has watched the content management space in which Box operates for many years and sees this victory for Levie as well.
Box was the clear winner. Starboard underestimated Aaron Levie's loyalty, which I believe was misinterpreted by Starboard. Box employees and investors know that the company is a success story. They also know that customers are engaged and there is plenty of potential for growth.
This vote of confidence for Box will allow them to make acquisitions and invest in R&D, if they choose, Pelz-Sharpe said.
Although it is difficult to predict what the future holds, Starboard maintains its shares and has some influence in those numbers. Box has done better during its ownership tenure as evidenced by recent earnings results. The firm maintains that this is the ultimate goal.
Our goal was to make Box more efficient and to adopt best-in class practices in operating performance, financial results and compensation. This will allow us to create long-term value that benefits all stockholders. Starboards Feld stated that we will continue to monitor Box's progress and hope to see Box embrace the changes effected by our involvement to create long-term value.
