By Greg Bensinger
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (November 13, 2017).
Uber Technologies Inc. cleared the way for a multibillion-dollar
investment led by SoftBank Group Corp. that would transform the
corporate structure of the world's most valuable startup and give
the ride-hailing company a powerful ally in its battle against
global rivals.
The deal, confirmed Sunday by Uber, took shape after former
Chief Executive Travis Kalanick and a major investor, Benchmark,
reached an agreement over control of board seats, including putting
on hold a lawsuit against the former chief, according to people
familiar with the matter. The two sides appeared to be at an
impasse just days ago.
Once completed, the deal would add six directors and introduce
voting changes that would effectively limit Mr. Kalanick's power on
the board, the people said. It also would bring Uber needed
stability after a year of turbulence: The San Francisco company is
still grappling with the fallout from 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.
An investment by SoftBank represents an early win for new CEO
Dara Khosrowshahi. He is working to overhaul Uber's workplace
culture while also battling regulators from Brazil to the United
Kingdom over proposed rules that would curtail the company's
ability to operate.
"It's a pretty great reset for the company," said Bradley Tusk,
a political strategist and investor in Uber. "Everyone staying in
is focused on the possibilities of the future and everyone mired in
the past and present can move on."
Directors have used the proposed SoftBank deal to push through a
sweeping set of board reforms sought by investors. The reforms only
kick in if the investment deal is consummated.
"We believe this agreement is a strong vote of confidence in
Uber's long-term potential," an Uber spokesman said in an emailed
statement. "Upon closing, it will help fuel our investments in
technology and our continued expansion at home and abroad, while
strengthening our corporate governance."
SoftBank, leading a consortium of investors, has been trying
gain at least a 14% stake in Uber, according to the people
familiar. A two-pronged investment could total $10 billion, with
SoftBank directly contributing at least $1 billion, buying shares
that reflect the company's valuation at $68 billion, and buying the
rest of the stake from investors at a lower price, the people
said.
Details of the tender offer are still to come -- pricing remains
an issue -- and could fail to entice enough investors to sell their
stakes. If SoftBank doesn't garner at least 14%, the Japanese
investor could scuttle the deal, people familiar with the matter
have said.
Benchmark agreed to put a hold on its lawsuit against Mr.
Kalanick, while the former CEO will allow directors to vote on any
future appointees he makes to the board for the three seats he
oversees, these people said.
The investor, with a board seat and a stake valued at more than
$8 billion, had sued Mr. Kalanick to turn control of his seats back
to the board, a move that divided directors. Mr. Kalanick was
granted control of three board seats as part of a $3.5 billion
investment from a Saudi wealth fund in 2016.
Once the deal is complete, Benchmark will drop its suit, said
the people familiar with the matter.
For SoftBank, the deal would give it a stake in all of the
world's largest ride-hailing firms. It also already has directors
on the boards of ANI Technologies Pvt. Ltd.'s Ola and GrabTaxi
Holdings Pte. Ltd., which compete with Uber directly in India, and
Singapore and Southeast Asia, respectively.
SoftBank still faces hurdles in its goal of taking a commanding
stake in Uber. Benchmark, which controls about 13% of Uber,
privately has wavered on whether it will sell based on the
valuation of the tender offer, and Mr. Kalanick has indicated he
plans to retain all of his roughly 10% stake, according to the
people.
Benchmark has said it believes Uber could be valued at $100
billion, though talks on the tender offer have centered on a
valuation of around $50 billion, according to the people.
Upon completion of a deal, a set of governance reforms would
kick in, including eliminating the outsize voting power of early
investors and adding six seats to Uber's 11-person board, two
slated for SoftBank, the people said.
The voting provision effectively would limit Mr. Kalanick's
control by creating equal voting power among shareholders. Still,
with oversight of three board seats, he would remain an influential
force at the company he co-founded eight years ago, and he remains
in close contact with Mr. Khosrowshahi and other executives.
Mr. Kalanick in September unilaterally filled two board seats,
which surprised fellow directors and the new CEO. He named two
well-known executives in former Xerox Corp. CEO Ursula Burns and
former CIT Group Inc. CEO John Thain.
Uber's board has set a deadline to hold an initial public
offering sometime in 2019. That gives the company and its new CEO
some time to repair its damaged reputation, fill a number of top
executive roles, resolve a series of prominent lawsuits and improve
financial losses that totaled more than $3 billion last year.
Write to Greg Bensinger at greg.bensinger@wsj.com
(END) Dow Jones Newswires
November 13, 2017 02:47 ET (07:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.