Benefitfocus announces $80 million investment by BuildGroup

After laying off 250 employees and cutting executive salaries, cloud-based benefits management platform and services provider Benefitfocus is announcing an $80 million investment from BuildGroup LLC, an investment company affiliated with long-time Benefitfocus Director Lanham Napier, subject to customary closing conditions.

BuildGroup agreed to invest $80 million in Benefitfocus Series A convertible preferred stock. The preferred stock carries an 8% dividend payable in cash or in kind at the option of the Company, and a conversion price of $15, which is approximately a 50% premium to the 10-day volume weighted average share price. On an as-converted basis, the investment represents approximately 13% of the Company’s total shares outstanding on a fully diluted basis. In connection with the closing of the investment, BuildGroup may appoint two directors to the Company’s Board of Directors, one of whom will be Lanham Napier and the other of whom will be reasonably acceptable to Mason Holland, cofounder and executive chairman of the board. Napier will also serve as the lead independent director on the board.

“This investment provides us added financial flexibility to further our mission of improving lives through benefits. The net proceeds from this investment will allow us to accelerate ongoing initiatives, including the potential reduction of debt and the review of value-enhancing acquisitions that meet our stringent criteria and would extend our market or technology leadership. The investment by BuildGroup should help us unlock the Company’s full potential to connect buyers and sellers on our digital benefits platform and drive continued profitable growth for the benefit of our investors.” – Ray August, President and CEO of Benefitfocus.

“We are excited to make this investment in Benefitfocus. We believe Benefitfocus has an immense leadership opportunity to help companies, health plans, providers and individuals reduce healthcare costs and deliver high performance benefits plans. Benefitfocus has been building out its modern business model capabilities, and we look forward to supporting the team as they improve lives through benefits. With this funding the company has the financial resources it needs to build incredible products and lead the market.” – Lanham Napier.

“BuildGroup was founded by like-minded entrepreneurs with a proven track record operating and investing in companies with the potential to create strong, lasting value. Lanham has served as a Benefitfocus director since 2014. Given his knowledge of our strategy, business, and management team, this investment represents a strong vote of confidence in the Company’s growth potential.” – Mason Holland.