By Nimra Noor, International Business Writer
A multibillion-dollar investment in Uber Technologies Inc. by Japanese conglomerate SoftBank finalized on Sunday night, November 11, following weeks of delays. This agreement would reconstruct the corporate structure of the ride-hailing company, providing it a powerful ally in its marathon against global rivals.
Both of the parties have been in deadlock for weeks. However, the legal battle between Travis Kalanick, former Chief Executive of Uber, and a combatant shareholder, Benchmark, got resolved after they reached an agreement over control of board seats. The agreement includes putting the lawsuit on hold, according to people with knowledge of the deal but not authorized to discuss it publicly. They told The Wall Street Journal that once the deal is completed, it would significantly limit Mr. Kalanick’s power on the board with the addition of six new members, alongside introducing certain changes in voting procedure. It would also bring Uber much needed stability after a year of controversy, resulting from of a former software engineer’s charges of sexual harassment, among other scandals that led a group of investors to push out Mr. Kalanick in June.
The new Chief Executive Officer of the San Francisco company, Dara Khosrowshahi, however, seems to benefit from the deal as an investment by SoftBank represents an early achievement for him. He is working to rebuild Uber’s workplace culture, in addition to combatting regulators from Brazil to the United Kingdom over proposed rules that would curtail the company’s ability to operate. “We believe this agreement is a strong vote of confidence in Uber’s long-term potential,” an Uber spokesman said in a statement. “Upon closing, it will help fuel our investments in technology and our continued expansion at home and abroad, while strengthening our corporate governance.”
The other side, however, sent out a sharper-toned statement on behalf of Rajeev Misra, the Chief Executive of SoftBank Investment Advisors, to emphasize that the deal has not closed yet stating. “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,” Misra commented on Monday.
Reuters reported that the investor group, which along with SoftBank is being led by San Francisco investment firm Dragoneer, plans to buy about $1 billion worth of newly issued shares and make a tender offer for about 14 percent of Uber’s existing shares. In case this amount of shares is not garnered, the Japanese tech giant could scuttle the deal. “If conditions on share price and a minimum of shares are not satisfactory for the SoftBank Group side, there is a possibility the SoftBank Group may not make an investment,” SoftBank Group said in a separate statement issued two days after the deal.
The stakes are high for Uber. If the deal falls apart, SoftBank’s money could make its way to its rival, Lyft. If the agreement goes through, it would bring in money that Uber could use to help fund expansion and operations amid growing competition from its competitors, along with benefitting from the global ties of SoftBank in its ongoing international expansion.
According to CNN, some have commented that the deal is unusual since SoftBank has also invested in Uber competitors, including Ola in India. Nonetheless, the Japanese tech and telecoms firm is said to take a different approach from other venture capitalists and intends to invest in multiple companies in the same category, to achieve SoftBank founder Masayoshi Son’s vision of a future driven by artificial intelligence and interconnected devices.
A version of this article appeared in the Tuesday, November 21st print edition.
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