Online bulk-products retailer Boxed.com plans to become a public company via a merger with special purpose acquisition company (SPAC) Seven Oaks Acquisition Corp.
New York-based Boxed and Seven Oaks said Monday that the merger carries a pro forma combined equity value of about $900 million. Plans call for the merged company to be called Boxed Inc., listed in the United States under a new ticker symbol, and be led by current Boxed co-founder and Chief Executive Officer Chieh Huang as CEO, with Seven Oaks Chairman and CEO Gary Matthews serving as chairman.
“We are excited to take this important step forward to position Boxed for our next phase of growth,” Huang (left) said in a statement. “This transaction will allow Boxed to capitalize on the tailwinds that e-commerce businesses are experiencing.”
SPACs are publicly listed shell corporations formed to raise funds through initial public offerings to acquire private companies, thus making them public. Boxed and Seven Oaks said the merged company is expected to receive $334 million in net cash proceeds from Seven Oaks’ cash in trust of $259 million and $120 million in private placement financing. No secondary shares are being sold by current Boxed shareholders.
Also with the transaction, Boxed plans to monetize its proprietary, end-to-end e-commerce technology via a software-as-a-service (SaaS) offering. In January, the e-tailer entered a multiyear SaaS partnership with Aeon Group, Japan’s largest grocery retailer and one of Asia’s biggest retail conglomerates. German discount grocer Lidl also has piloted Boxed’s technology in a home delivery service test in the U.S.
“This capital will also allow us to fund B2B growth, third-party marketplace expansion and drive our unique SaaS business,” according to Huang. “We look forward to partnering with the seasoned team at Seven Oaks as we leverage their operational and public company expertise.”
Founded in 2013, online-only retailer Boxed provides warehouse club-style shopping — including groceries, pantry items, household staples, health and beauty aids, office supplies, and a variety of organic and green products — through its website and mobile app. Consumers and businesses can purchase club-sized packages with free two-day delivery in the continental U.S. on purchases of over $49, without the membership fees of traditional warehouse clubs. It also offers Boxed Express, an on-demand delivery service for perishables.
Seven Oaks noted that Boxed offers a differentiated e-commerce model in the more than $100 billion U.S. online grocery market, projected to expand at an approximately 20% compound annual growth rate (CAGR) over the next five years. Boxed generates a big basket size, with an average of eight items for a value of about $100 per order, and its growing BoxedUp paid subscriber base provides a loyal, recurring revenue stream, Seven Oaks said. Boxed’s B2B customers range from small and midsize businesses to Fortune 100 enterprises, and its technology encompasses the customer-facing front-end, back-end operational software and homegrown automation robotics for fulfillment.
“Boxed is a leading e-commerce platform with significant competitive advantages and multiple opportunities to accelerate growth and drive value creation,” Matthews commented. “We are confident that by supporting Chieh and the talented management team with our proven operating playbook, Boxed will continue to achieve success in a rapidly growing market.”
The private placement portion of the transaction consists of common stock and convertible notes from institutional and strategic investors, including Brigade Capital Management, Avanda Investment Management and Onex Credit, and will close concurrently with the merger, Seven Oaks said. Boxed’s current equity holders will own about 62% of the pro forma company after the deal closes, assuming no shareholder redemptions.
Boxed and Seven Oaks expect the transaction to close in the fourth quarter, pending shareholder approval from both companies, regulatory approval and customary closing conditions. The boards of directors of both companies have approved the merger agreement.
“Boxed is another example of the American Dream at work,” Scott Moses, managing director and head of food retail and restaurant investment banking at PJ Solomon, said in an email on Monday. New York-based PJ Solomon is serving as a financial adviser to Boxed. “From Chieh Huang’s garage to the proprietary software, AI, futuristic automated fulfillment centers and robotics-driven platform this extraordinary team has built, Boxed is transforming the way consumers and businesses shop for bulk consumables, with a clear ESG focus at the foundation of its fast-growing, differentiated brand and its unique, end-to-end SaaS offering. It is so exciting to see two great leaders — Chieh Huang and Gary Matthews — join forces to create value for their teams and their shareholders.”