ReutersDec 29, 2017 09:47:13 IST
A consortium led by SoftBank Group Corp has successfully bought a large number of shares in Uber in a deal that values the ride-hailing/food delivery firm at $48 bn (£36 bn), Uber said on Thursday.
The price is a discount of about 30 percent to Uber’s most recent valuation of $68 bn. The deal will trigger a number of changes in the way the board oversees the company, which is facing federal criminal investigations, a high-stakes lawsuit and complaints about its workplace culture.
Uber said the deal would be completed early next year. SoftBank and the rest of the consortium, which includes Dragoneer Investment Group, will own about 17.5 percent, including a secondary share purchase from earlier investors and employees, as well as $1.25 bn of fresh funding.
SoftBank required a minimum threshold of a 14 percent stake of the company to proceed with the deal. SoftBank itself will keep a 15 percent stake, while the rest of the consortium will own about 3 percent.
The investment is seen as a sign of support from the influential investors for Uber’s chief executive, Dara Khosrowshahi, who took the job in August and has helped negotiate the deal. Uber is losing more than $1 bn each quarter and a cash infusion is critical.
Uber said it would use the investment “to support our technology investments, fuel our growth and strengthen our corporate governance”.
The Wall Street Journal first reported on Thursday that the deal would be successful, citing unnamed sources.
When the deal is completed, the company will make governance changes, including expanding its board from 11 to 17 members including four independent directors, limiting some early shareholders’ voting power and cutting the control wielded by the former chief executive Travis Kalanick.
“The stockholders did the smart thing,” said Erik Gordon, an entrepreneurship expert at the University of Michigan’s Ross school of business. “The price is less important than locking in the governance changes and securing the support of the world’s most powerful technology investor.
“If the stockholders hadn’t taken the price, the value of the company would have been battered by a return to stockholder infighting and the possibility of Kalanick’s return.”
Rajeev Misra, the chief executive of SoftBank’s Vision Fund, a $98 bn tech investment vehicle, will join the Uber board, along with a second representative from SoftBank. Misra said SoftBank had “tremendous confidence in Uber’s leadership and employees”.
The board at Uber, which is planning an initial public offering in 2019, made their final concessions to pave the way for the SoftBank deal in early November.
The SoftBank founder, Masayoshi Son, has taken a keen interest in ride-hailing companies around the world and already has sizeable stakes in China’s Didi, Brazil-based 99, India’s Ola and Grab Singapore, all of which have competed with Uber.
The investment comes after a year of troubles for Uber, including a lawsuit by Alphabet Inc’s self-driving car unit, Waymo, that alleges trade secrets theft, and federal investigations that include possible bribery of foreign officials in Asian countries and the use of software to evade regulators.
Over the past year, a former employee’s charges of endemic sexual harassment led to an internal review, the mayor of London said he would strip Uber of its licence and Uber revealed it had covered up a major hack.
In June, Kalanick was forced to step down, although he remains on the board and is still one of the largest stakeholders.
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