Grocery Courier Boxed to Go Public in SPAC Deal
Grocery courier Boxed Inc. said it would go public through a merger with a special-purpose acquisition company, or SPAC, capitalizing on delivery demand that swelled during the Covid-19 pandemic.
Boxed and Seven Oaks Acquisition Corp. SVOK 0.20% said the deal would value the combined company at nearly $900 million and provide money to serve more households and businesses that started ordering groceries online during the pandemic.
“It's given everyone a taste of an easier and a more efficient way to shop,” said Chieh Huang, chief executive officer and co-founder of Boxed, who will continue to lead the company.
Mr. Huang started Boxed in 2013 from his two-car garage in New Jersey, where he and three co-founders would buy and ship groceries themselves. Today Boxed delivers groceries and other bulky items such as toilet paper and office supplies from fulfillment centers to consumers and businesses across the country.
Many people have become used to shopping online for groceries over the past year. Mr. Huang said he expects shoppers to continue trying new products and a wider range of services via delivery.
Boxed faces mounting competition for its business. While higher than before the pandemic, grocery delivery sales have slowed recently. Instacart Inc., which has said it expects to go public, is pitching its service to businesses and recently introduced 30-minute delivery. Instacart, DoorDash and Uber Technologies, Uber Eats division are also delivering a wider assortment of goods such as baby products, prescriptions and electronics in addition to restaurant meals and groceries. Despite recent growth, they are struggling to turn a profit, squeezed by labor and shipping costs.
Boxed isn't profitable, Mr. Huang said, but Boxed and Seven Oaks projected that its software, advertising and delivery businesses would help it turn a profit within several years. Boxed's sales growth has also slowed from high levels at the start of the pandemic last spring, but the company said it expects to continue adding customers.
Mr. Huang said that making more deliveries to businesses, in particular, can be more profitable than sales to private households. Boxed's sales to businesses such as United Airlines Holdings Inc were cut in half last year from 2019 as workers stayed home during the pandemic but are now recovering, he said.
“We think it's going to be the most prolific reopening of America,” he said.
When complete, the transaction will assign Boxed an equity valuation of about $887 million and give it about $334 million of cash. The boards of both companies have approved the deal, which is expected to close in the fourth quarter. Boxed's existing backers are rolling over their investments into the public company, which will carry the Boxed name.
New York-based Seven Oaks considered purchasing some 70 companies over the past six months, said CEO Gary Matthews. He said Seven Oaks was drawn to Boxed's software and the robotics technology used in its fulfillment centers. Boxed said that it consolidates large orders to reduce its carbon footprint and that a majority of its roughly 200 corporate employees are people of color.
SPACs, which look for a target to combine with and take public, have grown more popular. Investor enthusiasm for the strategy has faded recently as regulators increase scrutiny of such transactions and as shares of some high-profile vehicles underperform.