Janina Lim – Fourth Estate Contributor
San Francisco, CA, United States (4E) – Japan’s SoftBank Group Corp. has sealed a multibillion-dollar deal to acquire a substantial stake in ride-hailing company Uber Technologies Inc.
“We’ve entered into an agreement with a consortium led by SoftBank and Dragoneer on a potential investment,” Uber said in a statement.
The pact, touted as one of the biggest start-up deals in the corporate world, allows SoftBank, along with Dragoneer Investment Group and General Atlantic, to put in $1 billion in Uber in fresh capital and buy about $9 billion in stock from existing investors. Governance reforms at the company to reduce the role of Uber co-founder Travis Kalanick over the firm.
“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 firm added.
According to people familiar with the matter who requested confidentiality of their identity, the deal will call for governance changes to reduce the influence of Kalanick against whom the firm filed a lawsuit which may be dropped – a condition the former chief set before he can approve the deal — once Softbank enters the picture.
Uber’s board has already approved a list of governance changes that restrict Kalanick’s role at the firm, including equalizing the voting power of different share classes and expanding the number of the board to 17 to allow for new independent directors.
These moves are perceived crucial in welcoming the deal with SoftBank, which may be the largest private stock sale ever.
With soft bank, Uber is not only expected to have fresh capital but also clear the spate of scandals it has been involved in for the past year.
SoftBank,is also a major investor in Ola and Grab, among the world’s biggest ride-hailing companies and Uber’s top rivals in India and Southeast Asia.
The Japanese tech firm’s connection may present Uber a possible with these other ride-hailing firms.
SoftBank is expected to buy shares from Uber at the company’s current valuation of nearly $70 billion while the price of the secondary stock sale is expected to be lower.
“There is value to fixing the governance problems, but that value should not be given to new outside investors through an undervalued tender offer,” Glen Kacher, president of Light Street Capital Management LLC, which has a stake in Uber’s Series E financing round, was quoted.
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 familia to the matter said.
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