After months of back-and-forth negotiations, a SoftBank-led investor consortium finalized an acquisition deal to buy 17.5 percent of Uber at a $48 billion company valuation, a deep discount from the company’s previous valuation of $68 billion. Nevertheless, SoftBank (SFTBF)’s decision to invest now rather than after Uber (UBER)’s planned initial public offering in 2019 implies strong confidence in the scandal-ridden and yet-to-be-profitable company.
Both companies confirmed the deal on Thursday in statements to the Wall Street Journal.
To be precise, SoftBank and its allies are buying a portion of Uber at two difference valuations. SoftBank will own 15 percent of Uber’s investor and employee shares at a valuation of $48 billion, and the rest of the consortium will own about 3 percent. In addition, SoftBank will invest $1.25 billion in fresh capital at the $68 billion valuation. The transaction will total just shy of $10 billion.
“We have tremendous confidence in Uber’s leadership and employees and are excited to support Uber,” a SoftBank spokesperson said in a statement.
For the better part of 2017, Uber has lived in the aftershock of the departure of former CEO Travis Kalanick and a series of workplace harassment scandals targeting the company’s management level. Uber’s board agreed to bring in SoftBank as an investor in October, but the negotiations were slowed by Kalanick’s legal battle with benchmark Capital, an early investor in Uber.
Benchmark successfully pushed for the ousting of Kalanick in June, but both parties remained on the company board. In August, Benchmark brought a surprise lawsuit against Kalanick for defrauding investors in an effort to completely cut his ties with the company.
In November, after SoftBank expressed an interest in buying Uber shares, Benchmark agreed to drop the case once the SoftBank deal is closed.
The Journal reported that Uber isn’t in immediate need for cash just yet, but SoftBank’s capital infusion will help the ride-hailing company to alleviate some of the cost burdens and craft a model to make profit. Despite Uber’s rising revenues, the company posted $2.52 billion in losses over the past two financial quarters.
As part of the deal, SoftBank will also elevate its stake in Uber’s governance. Uber will add two SoftBank executives, including Rajeev Misra, head of SoftBank’s $93 billion Vision Fund, to the company board.
SoftBank is a significant shareholder in some of Uber’s largest peers, including China’s Didi Chuxing, India’s Ola and Singapore’s Grab, which has a strong presence in Southeast Asia.
