The ride-hailing company Uber Technologies Inc. yesterday gave their nod to the funding from SoftBank Group Corp., with the Japanese company offering to acquire shares worth billions of dollars in the taxi company, a move that is regarded as the largest private startup deals in history.
The agreement between the two firms allows SoftBank and other companies access to invest over a billion dollars in Uber and move ahead with offering over the next coming weeks that will see SoftBank purchase shares worth as much as $9 billion from their current investors. The deal might fail as it largely depends on the current investors agreeing to part with their shares.
In a statement released after the agreement, Uber stated that “We’ve entered into an agreement with a consortium led by SoftBank and Dragoneer on a potential investment. We believe this agreement is a strong vote of confidence in Uber’s long-term potential. Upon closing, it will help fuel our investments in technology and our continued expansion at home and abroad, while strengthening our corporate governance.”
The terms of the deal had been discussed by the two groups for weeks according to anonymous sources that are close to the matter. The board of Uber was briefed about the terms of the agreement and the company’s lawyers are currently working round the clock to ensure that the agreement is completed, according to the sources.
The agreement also sees venture capital firm Benchmark agreeing to momentarily drop its lawsuit against the co-founder of Uber Travis Kalanick, and also dropping their complaints after SoftBank and other governance reform deals begins.
The deal is a major one for Uber who have been embroiled in scandals over the last few months. The company almost lost this deal as SoftBank was at one point considering investing in Uber’s rival Lyft. Uber is, however, trying hard to put the scandals behind it and move on with their dominance of the ride-hailing industry.
The governance reforms sought after shouldn’t be a problem as the board of Uber had already approved some reforms that restrict Kalanick’s role at the company. One of such reforms is equalizing the voting power of different share classes and also adding more members to the board to make them 17 board members in total. This has also seen independent directors emerge.
SoftBank agreed to purchase the shares at a flat price if the shareholders do not work together to increase the price of their shares.