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Black Box To Be Sold For $16.4 Million
Beleaguered solution provider Black Box has agreed to be sold to a Singapore-based subsidiary of AGC Networks Ltd. for $16.4 million, the companies said Sunday.
The subsidiary, AGC Networks Pte Ltd., plans to buy the company for $1.08 per share, about 21 cents more than the closing price of Black Box’s 15,234,000 shares Friday. In July, the company reported annual revenue of $774.6 million for fiscal year 2018, down 9.5 percent from $855.7 million for the prior year.
The deal is expected to close before the end of this year.
“We were looking for a partner that could provide us with the resources to grow our services and products businesses in a way that benefitted clients and employees,” Joel Trammell, CEO of Laurence, Pa.-based Black Box, said in a statement. “As we visited in depth with the AGC team, it became obvious that the fit was very strong and that the combination would make our company more exceptional. I look forward to working with Sanjeev and his team to build a world class global technology services company.”
On Sunday night, Ron Basso, executive vice president, general counsel and secretary, declined to comment to CRN about the story.
Black Box in a June 8-K filing with the U.S. Securities and Exchange Commission alerted investors that it might not have the cash on hand to exist as a going concern . The filing warned that the company had lined up financing, but the loan carried the condition that Black Box sell its federal services business, one of the solution provider’s three divisions.
Black Box did sell the federal services business to a private equity firm in August. And shortly after the 8-K filling, it stunned investors by announcing a deal with a “social media giant” worth up to $300 million to wire the company’s data center in Ohio.
But while Black Box’s stock price flirted with $2.25 last summer, it has traded below a dollar since Oct. 16, placing the company in danger of being delisted from from the NASDAQ stock exchange.
“We have known Black Box for many years and believe that its skilled teams and strong client relations with world-class enterprises and partners will allow us to better serve our global clients,” said Sanjeev Verma, Executive Director and CEO of Mumbai-based AGC Networks, in a statement. “The merger of our two companies will create a unique organization that has the scale to deliver world-wide technical solutions to the largest organizations.”
The transaction brings together two global IT solutions providers that share a “client focus” approach and are committed to accelerating their clients’ business, according to the statement. AGC brings its strong presence in India, the Middle East and Pacific Rim to complement Black Box’s services focus in the Americas and Europe, while also enhancing the presence in other global markets. Both companies provide full managed services capabilities in unified communications and collaboration, cloud, data center and edge technologies.
Black Box saw its share price drop nearly 64 percent from $21.01 to $7.62 in 2015 amid persistent sales woes, which then-CEO Michael McAndrew blamed on the ’unacceptable’ performance of his sales team. McAndrew had tried reorganizing the sales team, replacing 30 percent of its staff in two years.
McAndrew was gone in February 2016, replaced by Eslie “E.C.” Sykes. Sykes hoped to increase the company’s focus on expanding into faster-growing markets, including the April 2016 purchase of desktop virtualization specialist Cloudium. But as Black Box’s financial difficulties continued, Sykes retired and was replaced by Trammell in November 2017.
Nevertheless, the solution provider continued working to bring new, innovative solutions to market. In May, Black Box – No. 42 on the 2018 CRN Solution Provider 500 – brought a new product to market, which it claimed could set up cell signals and data centers in forward areas, or disaster stricken places, in a matter of minutes. Calling it a critical component of any emergency kit for troops or federal agencies, the company told CRN that the Acuity Micro Data Center could replace truckloads of equipment with a single, 30-pound suitcase.
Then in June, in a non-binding vote, Black Box shareholders rejected an executive officer compensation plan that included $969,000 in severance for Sykes.
That award alone would have been $211,000 more than the current CEO Trammell was paid in all of fiscal 2018, and represented less than a third of the former CEO’s total compensation package.
According to the SEC filing, 56.3 percent of shareholders – or 4.14 million votes – said no to the board’s recommended pay structure, with 43.6 percent or 3.21 million shares sided with the board.