Uber will move forward with $1 billion SoftBank investment: Why it matters

Uber is close to finalizing a multibillion-dollar investment by Japan's Softbank. | AP file

In a statement to CNBC, Rajeev Misra, CEO of Softbank Investment Advisors and a Board Director of Softbank Group, said, "After a long and arduous process of several months it looks like Uber and its shareholders have agreed to commence with a tender process and engage with SoftBank". The agreement struck on Sunday removed the final obstacle to allowing SoftBank to proceed with an offer to buy to stock.

If the SoftBank deal goes through, it would function like a mini-IPO that helps tide Uber over until it actually goes public in 2019 as planned.

Crucially, Softbank expects to buy up others' Uber shares at a lower price than it will pay for its direct investment. Uber would also get a cash infusion as it fights a resurgent Lyft in its backyard and increasingly well-funded competitors overseas, not to mention the looming financial risk posed by lawsuits and disputes over driver benefits. SoftBank's roughly $1 billion investment of fresh funding is expected to be at the same valuation.

The move was unveiled shortly after reports emerged that its former CEO Travis Kalanick and an influential investor had buried the hatchet, paving the ways for the acquisition. Benchmark had alleged that Kalanick duped investors into allowing him to create three disputed board seats that it later wanted to delete, which action would dump Kalanick out of Uber altogether. Kalanick blindsided Uber in September by appointing two new members without notice.

But it was threatened by conflict between Kalanick and United States venture capital firm Benchmark.

Although Kalanick quit as Uber chief exec, he remains on the board, having previously created the seat he now occupies.

Uber argued that once in the bag, the investment would help fuel its development in the tech sector and its continued expansion at home and overseas, "while strengthening our corporate governance". It also reduced Kalanick's and Benchmark's influence on the board by removing special voting powers in two categories of stock held disproportionately by Kalanick. "Because all the parties, in the end, they know this is a good direction".

Related News: