Uber investors to sell stock in $9 Billion SoftBank-led deal

SoftBank billionaire Masayoshi Son will soon own billions of dollars of Uber shares. Akio Kon/Bloomberg

Uber Technologies shareholders agreed to sell a sizable stake in the ride-hailing leader to an investor group led by SoftBank Group, allowing the Japanese conglomerate to amass a piece of the company at a steep discount to the last valuation.

The transaction implies a US$48 billion value for Uber, according to a person familiar with the deal. The investor group, which includes SoftBank, Dragoneer Investment Group, TPG, Tencent Holdings Ltd and Sequoia Capital, also will put US$1.25bn directly into the San Francisco-based business, at a higher valuation of US$69bn.

“We look forward to working with the purchasers to close the overall transaction, which we expect to support our technology investments, fuel our growth, and strengthen our corporate governance,” an Uber spokesman said Thursday in an emailed statement.

Existing backers with more than 20 per cent of Uber shares tendered their stakes, and about US$9bn is being invested in the overall deal. The SoftBank-led group will end up owning roughly 17.5 per cent of the startup, with SoftBank at 15 percent holding the largest stake.

“We are appreciative of the support from Uber’s shareholders in the successful tender offer and look forward to closing the overall investment in January,” said Rajeev Misra, head of SoftBank’s US$93bn tech investment fund. “We have tremendous confidence in Uber’s leadership.”

The deal will make SoftBank one of Uber’s largest shareholders and comes with two board seats. Mr Misra and Sprint chief executive Marcelo Claure have long been viewed as likely candidates to fill those positions. (SoftBank owns most of Sprint). The transaction will also put in motion a slate of governance reforms at Uber that were dependent on the deal going through, which will expand the board to 17 and revoke outsize voting power given to early backers. Benchmark, Uber’s largest venture capital backer, will also drop a legal case it’s pursuing in arbitration against former co-founder and chief executive Travis Kalanick.

Dara Khosrowshahi has been a champion of SoftBank’s proposal since taking over as chief executive officer in September. In addition to the governance reforms, he’s looking to appease early employees and investors who don’t want to hold onto their shares until 2019, when Uber is expected to conduct an initial public offering. It would also give the business some additional capital to beat back rivals, which have gained steam after a succession of setbacks for Uber. Didi Chuxing, the main ride-hailing option in China, recently said it raised another round of financing from SoftBank, this time topping US$4bn.

This year, Uber faced a politically motivated boycott, employee claims of sexism, a high-profile lawsuit over trade-secrets theft, a video published by Bloomberg showing Kalanick berating an Uber driver and questions about his business tactics. The unwanted attention has brought intense government scrutiny. The US Justice Department was exploring at least five criminal probes in recent months, and London moved to ban the service.

Mr Khosrowshahi is looking to quickly move past a disastrous 2017. He replaced the company's legal chief, ousted the head of security who oversaw some of the most controversial projects and hired the former chief executive of Orbitz to run operations. However, more ghosts of Uber's past continue to emerge. In November, Bloomberg reported on a hack from a year earlier that exposed data on 57 million people and that Uber paid a ransom to keep the breach quiet.

For SoftBank, the deal will make founder Masayoshi Son an influential investor across the ride-hailing sector. He will hold stakes in five of the world’s biggest startups, including the market leaders in China, India, Southeast Asia, Brazil and the US. SoftBank earlier this month took part in Didi Chuxing’s fundraising, adding to an earlier US$5.5bn investment in the company.

SoftBank-backed startups compete with each other in several key markets. Son may use his influence to encourage mergers among the competitors in certain countries.