SoftBank is set to purchase US$1 billion of fresh stocks from Uber
Japanese telecom conglomerate, SoftBank Group, has completed a deal that will see it purchase a significant stake in ride-hailing giant Uber, according to a report by The New York Times.
SoftBank is aiming to acquire at least 14 per cent of the company, which will consist of fresh stock — US$1 billion at the company’s US$68.5 billion valuation — and existing shares from current Uber investors, the report added.
According to the Wall Street Journal, the entire deal could be worth US$10 billion; but added that if Uber’s current investors could not agree on a pricing to sell their stakes, SoftBank may call off the deal.
Corporate reforms will also be enacted if the deal passes. New voting changes will be introduced to limit early investors’ as well as ex-CEO Travis Kalanick’s voting power, although he will remain on the board. Six new directors will also be added to Uber’s board.
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The last step of the investment process comes after months of negotiation between the two companies and impasses.
Benchmark, an Uber investor with a US$8 billion stake in the company, was previously suing Kalanick to transfer his board seats to the directors. It has agreed to suspend its lawsuit. And if the deal is completed, Benchmark will drop the suit.
Kalanick, who still oversees three board seats, will then allow directors to vote on the future appointees he nominates for the seats.
The Wall Street Journal added that there are other factors still being considered before the deal is set in stone. For one, Benchmark is still mulling whether it “will sell based on the valuation of the tender offer”. And second, Kalanick still wants to retain 10 per cent of the company.
If the two sides complete the transaction, SoftBank will have a stake in some of the industry’s most prominent ride-hailing companies. In May, it made a whopping US$5 billion investment in China’s DiDi. It also participated in a US$2 billion round in Uber’s competitor, Grab, in July this year.
Uber, which has been experiencing a tumultuous year, owing to scandals, cultural restructuring, lawsuits, breaches of privacy, and key executive departures, has also had to grabble with significant financial losses due to increasing competition from its rivals.
Uber China threw in the towel last year by way of a merger deal with Didi. Kalanick’s successor Dara Khosrowshahi, admitted recently that Uber is still unprofitable in its home market as well as in Southeast Asia.
If SoftBank and Uber can go forward with the deal, the new financing may give the embattled ride-hailing giant more space to manoeuvre out of its ruts.
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Image Credit: Uber
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