SoftBank Becomes Uber’s Largest Shareholder as Deal Closes

By Nicole Encalada, International Business Writer

SoftBank Group Corp., a multinational firm based in Tokyo, recently closed a deal with Uber Technologies Inc., thus becoming the largest stakeholder in the ride-services firm. The Japanese company confirmed that it has successfully acquired 15 percent of Uber. The other members of the bidding group, Dragoneer Invest Group and Sequoia Capital, will receive a stake of 3 percent altogether. The recent deal involves the purchase of shares from other investors and employees, and shareholders have sold $8 billion to the Japanese firm in total. The deal was done at a discounted valuation of $48 billion and has resulted in SoftBank emerging as Uber’s largest stakeholder.

Now that the deal is in place, other changes will be made to the company’s board, which primarily involve expanding the board by having additional seats for Sprint Corp. CEO, Marcelo Claude and one of SoftBank’s own executives, Rajeev Misra. The two newcomers will join recent appointees, former CEO of Xerox Ursula Burns and former CEO of CIT eGroup John Thain. According to Bloomberg, Misra said while commenting on the new deal, “Uber has a very bright future under its new leadership.”

The statement by Misra is seen as an approval of the current move by Uber CEO Dara Khosrowshahi. The firm had previously undergone numerous controversies during the executive-ship of Travis Kalanick. It was after the sexual harassment allegations last year that disagreements begin to emerge within the company, leaving Uber and Kalanick with a shaky reputation.

Fortunately, Uber CEO Dara Khosrowshahi was able to take lead on the deal, which was placing pressure and tension on the board during the months of discussion. Ultimately, the current deal has led Travis Kalanick, former-CEO, to walk away as billionaire: CNBC reported that Kalanick would walk away with $1.4 billion from the deal after selling almost a third of his stake in the company.

The deal has been solidified after several months of contemplation. The board first decided to move in SoftBank’s direction in October although the company was wary that the deal would fall apart. There were even talks by SoftBank’s CEO that the firm would invest in Lyft Inc. if the deal with Uber did not pull through. It was only in December when Uber stated they had enough shareholders willing to sell into the deal. Even early investors like Benchmark and Menlo Ventures decided to sell their own shares in the deal.

According to an Uber spokesperson, the new investment in technology will cause the service to be made available to places where it has not been offered yet, alongside working to improve the facility. Additionally, the ride-services firm will focus on growing in the US, Europe, Latin America and Australia. Unfortunately, the company will not make any movement in Asia, as it has proved to be a costly region for Uber. New investor, Softbank, also holds stakes in Uber’s international competitors, operating in Asia – China ride-hailing app Didi, India’s Ola and Southeast Asia’s Grab – all of which compete with Uber in the region.

SoftBank will even invest $1.25 billion as part of the deal. The investment, as well as new board members, seem to come as a preparation for the possibility the company will go public in 2019.

 

A version of this article appeared in the Tuesday, January 30th print edition.

Contact Nicole at

nicole.encalada@student.shu.edu

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