Uber Technologies approved SoftBank Group’s offer to buy a multibillion-dollar stake in the ride-hailing company, setting the stage for one of the largest private start-up deals ever.
The agreement lets SoftBank and other firms invest up to $1 billion in Uber and proceed with a tender offer in coming weeks to buy up to $9 billion in shares from existing investors. The deal could still fall through if there aren’t enough interested sellers. The deal also includes Uber governance changes.
“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.”
“After a long and arduous process of several months it looks like Uber and its shareholders have agreed to commence with a tender process and engage with SoftBank. By no means is our investment decided. We are interested in Uber but the final deal will depend on the tender price and a minimum percentage shareholding for SoftBank,” Rajeev Misra, CEO of SoftBank Investment Advisors and a Board Director of SoftBank Group, said.
The terms were negotiated for weeks, according to people familiar with the matter who asked not to be identified talking about private deliberations. Uber’s board was briefed on the terms Saturday and lawyers had been working to complete the language of the agreement, the people said.
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 kick in, the people said. Kalanick is agreeing to give Uber’s board majority approval over the board seats he controls should he ever need to fill them again, the people said.
The pact gets Uber closer to clearing a major hurdle as it tries to overcome a series of scandals, leadership turmoil and executive departures. The well-connected Japanese technology company could help Uber strike deals with competitors in India or Southeast Asia. SoftBank is a major investor in Ola and Grab, Uber’s rivals in those regions.
Uber’s board already approved a slate of governance reforms that restrict Kalanick’s role at the ride-hailing company, including equalising the voting power of different share classes and increasing the size of the board to 17 to allow for new independent directors. Those changes are contingent on the SoftBank investing in Uber.
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 threw a wrench in the deal, insisting that Benchmark put a hold on its lawsuit against him before he would approve it. Finally, this week, Benchmark relented after Uber’s new Chief Executive Officer Dara Khosrowshahi and other board members urged the firm to do so, two of the people said.
SoftBank, along with Dragoneer Investment Group and General Atlantic, are expected to invest at least $1 billion in Uber and purchase up to $9 billion worth of Uber shares from existing investors.
The initial price for the tender offer may not be set for more than a week, a person familiar with the matter said. SoftBank is expected to buy shares from Uber at the company’s current valuation of nearly $70 billion, but the price of the secondary stock sale — in which existing investors sell — is expected to be lower.
Investors TPG, Tiger Global, DST Global and the Chinese company Tencent Holdings. may also buy Uber shares as part of the deal, the people said.
The transaction may make Kalanick a cash billionaire if he decides to sell a large enough chunk of his stake in the company. The deal could also be the largest private stock sale ever, and will create a host of new San Francisco millionaires as early employees sell shares.