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‘SoftBank makes space for WeWork’
Posted on Tuesday, 08 January 2019 10:50
SoftBank is believed to have done a U-turn on USD 16.00 billion plans to acquire most of WeWork in favour of scaling back the investment in the US shared-office provider to USD 2.00 billion.
The Financial Times (FT) first reported the news the Japanese technology conglomerate has ditched the original intention of teaming up with its SoftBank Vision Fund to spend USD 10.00 billion to buy out shareholders.
It added the next step would have called for a USD 6.00 billion direct cash injection split over several years: USD 2.00 billion in 2019 and a USD 4.00 billion earn out in 2020 and 2021.
However, according to the media, the proposal faced several roadblocks, not least opposition from two of the main backers of the Vision Fund regarding the value of the potential deal.
One of the people with knowledge of the matter told the FT: “There is more hesitancy and a need to be more cautious on how they [SoftBank] are proceeding.”
Another factor is said to be the sharp sell-offs in equity markets, due to fears of a global slowdown and trade tensions between the US and China.
For example, shares in SoftBank’s homegrown telecommunications arm, which listed just last month, fell 14.5 per cent following the debut and are now trading 3.6 per cent lower than the initial public offering price.
However, it is believed the two companies could announce this scaled-back deal as early as today, though another source told the newspaper it is likely to be pushed back to later this week.
As it stands, the new investment proposal of USD 2.00 billion would comprise the purchase of new shares and secondary stock from existing holders, according to TechCrunch.
SoftBank has previously spent USD 8.00 billion on WeWork, which is said to have booked losses of USD 1.20 billion in the first nine months of 2018, widened from USD 933.00 million for all of 2017.
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