SoftBank will offer to buy Uber shares from existing shareholders at a valuation of $48bn, according to people close to the deal, representing a 30 per cent haircut from the ride-hailing group’s previous fundraising.
The pricing, which is lower than some shareholders expected, represents a key step in a complex investment worth as much as $10bn that is critical to Uber’s reform efforts.
As part of the deal, a SoftBank-led consortium will buy $1bn of new, preferred shares from Uber at the same valuation at which the company raised money last year, which was $68.5bn, including funds raised.
However, in a second, larger tranche of the deal, SoftBank will buy shares from existing Uber shareholders at a discounted price through a tender offer.
The Japanese conglomerate was expected to formally inform shareholders of its offer on Tuesday, and then those shareholders can decide whether to sell shares at that price.
For the deal to close, the consortium must buy at least 14 per cent of Uber’s shares through the tender. SoftBank may decide to raise the price if too few shareholders want to sell their shares at the $48bn level. The story was first reported by Bloomberg.
The valuation discount partly reflects the fact that Uber has undergone a series of crises since its fundraising last year, including the removal of its former chief executive Travis Kalanick, multiple costly lawsuits and censure in key markets such as London.
On the same day that SoftBank launched the tender, Uber suffered a major setback in a trial over the alleged theft of trade secrets related to self-driving technology. The judge in the case said that Uber had withheld evidence and postponed the trial, which was scheduled to begin next week.
Some level of discount is also normal for tender offers because they involve common shares that do not carry the same investor protections as preferred shares.
Uber’s valuation has already been written down this year by as much as 15 per cent by mutual funds including Vanguard.
Nevertheless, several shareholders had previously told the Financial Times they were hoping for a valuation of at least $50bn for the tender offer.
SoftBank, which is also invested in rival car-booking companies Didi and Ola, has been playing hardball during the months of tense negotiations leading up to this week’s pricing. The deal was delayed several times due to infighting on Uber’s board and disagreement over the terms of the complex transaction.
“By no means is our investment decided,” Rajeev Misra, SoftBank’s director, declared earlier this month. “We are interested in Uber but the final deal will depend on the tender price and a minimum percentage shareholding for SoftBank.”
Completing the SoftBank agreement is critical for Dara Khosrowshahi, Uber’s new chief executive, because the closing of the deal will trigger a slew of governance reforms. The reforms include reducing the influence of Uber’s founders by moving to a one-vote-per-share structure, and expanding the size of the board to 17 seats.
Rohit Kulkarni, analyst at SharesPost, said a discount of between 10 and 30 per cent was typical for start-up tender offers, which provide an outlet for early investors and employees to cash in their shareholdings.
“From a seller’s standpoint, the value proposition [for the SoftBank tender offer] is that they are able to liquidate their holdings,” he said, noting that Uber’s public offering is not expected until 2019 at the earliest. “If employees do not sell in this tender offer, they are looking at another two- to three-year holding period.”
For the tender offer to cross the 14 per cent threshold, it will need to garner support not only from employees, but more crucially from major shareholders such as Google and Benchmark.
Uber and SoftBank declined to comment.
Additional reporting by James Fontanella-Khan
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