Uber Confirms Multi-Billion Dollar Investment Deal From Softbank

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【Summary】Uber Technologies Inc. has approved SoftBank’s offer to buy a multi-billion dollar stake in the ride-hailing company, putting in place the pieces for one of the largest private stock sales in history.

Original Eric Walz    Nov 13, 2017 11:49 AM PT
Uber Confirms Multi-Billion Dollar Investment Deal From Softbank

SAN FRANCISCO — Uber Technologies Inc. has approved SoftBank's offer to buy a multi-billion dollar stake in the ride-hailing company, putting in place the pieces for one of the largest private stock sales in history. With the deal, Softbank will own a 14% stake in Uber.

As part of the deal, Uber's board agreed to sweeping governance changes, including measures that reduce the influence that Travis Kalanick, Uber's former chief executive, has at the company.

The agreement allows SoftBank, along with Dragoneer Investment Group and General Atlantic, to invest up to $1 billion in Uber and proceed to buy up to $9 billion in shares from existing investors and early employees. However, the deal is contingent on finding enough Uber shareholders who are willing to sell their stock. If Softbank cannot get enough buyers, it could propose a higher price, or walk away completely.

"We've entered into an agreement with a consortium led by SoftBank and Dragoneer on a potential investment," Uber said in a statement. "We believe this agreement is a strong vote of confidence in Uber's long-term potential. Upon closing, it will help fuel our investments in technology and our continued expansion at home and abroad, while strengthening our corporate governance."

The deal, which is known as a tender offer, can take up to a month or more. During the process, a price will be set for the existing Uber shares. If stockholders are reluctant to sell and SoftBank cannot hit its threshold of 14 percent ownership of Uber, SoftBank can walk away from the deal.

SoftBank is expected to buy shares from Uber at the company's current valuation of nearly $70 billion. However, the investor in a tender offer normally offers a higher price per share than the company's stock price, providing shareholders a greater incentive to sell their shares.

The terms were negotiated for weeks, according to people familiar with the matter who asked not to be identified, as negotiations were private. Uber board members were briefed on the terms over the weekend and lawyers had been working to complete the language of the agreement, the people said.

Uber intends to run newspaper ads informing investors about the share purchase. Then SoftBank will propose a price at which it will buy stock. Uber shareholders will then have to decide if they want to sell and how many shares they want to offer.

The deal gets Uber closer to clearing a major hurdle, as it looks to a 2019 IPO and overcoming a series of scandals, leadership turmoil, executive exodus and lawsuits. Softbank could also help Uber strike deals with competitors in India or Southeast Asia. SoftBank is a major investor in Ola and Grab, Uber's major rivals in those regions.

A Diminished Role for Former CEO Kalanick

As part of the deal, venture capital firm Benchmark agreed to put its lawsuit against Uber co-founder Travis Kalanick on hold and drop the complaint when SoftBank's investment and the governance reforms take effect, the people said. Kalanick is agreeing to give Uber's board majority approval over the two other board seats he controls, should he ever need to fill them again, the people said.

After a long negotiation with Uber, SoftBank agreed to buy shares at a single price as long as sellers were barred from working together to push up the price. Then Kalanick stalled the deal, by insisting that Benchmark put a hold on its lawsuit against him before he would approve it. Finally, Benchmark relented this week after Uber's new Chief Executive Officer Dara Khosrowshahi and other board members urged the firm to do so, according to sources.

Uber's board already approved a slate of governance reforms that restricts former CEO Travis Kalanick's role at the ride-hailing company, including equalizing the voting power of different share classes and increasing the size of Uber's board to 17 members, to allow for new independent directors. Those changes are contingent on SoftBank investing in Uber.

Other Investors Express Interest

Investors TPG, Tiger Global, DST Global and the Chinese company Tencent Holdings Ltd. may also buy Uber shares as part of the deal, the people said.

Softbank is eyeing other investment opportunities besides Uber. In May of 2017, Softbank announced its Vision Fund with $93 billion of committed capital. The SoftBank Vision Fund seeks to invest in the technology sector, making use of SoftBank's deep technology expertise and investment experience. The Fund is designed to be a catalyst for technology progress in anticipation that it will expand SoftBank's capabilities.

Uber's main rival in the U.S. Lyft, has also secured major financial backing from General Motors, Didi Chuxing and Alibaba.

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