Telecommunications and internet group SoftBank has reached the advanced stages of discussions to acquire a controlling stake in US-based workspace provider We Company, CNBC reported yesterday, citing people familiar with the matter.
The prospective deal would involve SoftBank paying $4bn to $5bn on new and existing shares in a transaction that would value the company at $7.5bn to $8bn pre-money, according to the sources. It was valued at $47bn as recently as January this year.
We Co is in the process of cost-cutting, getting rid of extraneous activities to focus on its core workspace business, WeWork, in the wake of a disastrous attempt at an initial public offering last month.
The news follows a report by the Wall Street Journal last week stating that talks were taking place. Although its Vision Fund is also a shareholder, SoftBank itself would make the investment, coming out with a stake sized at about 70%.
The deal is likely to involve a $3bn tender offer in tandem with an acceleration of $1.5bn in warrant financing SoftBank had already agreed to provide in April 2020, according to two sources.
SoftBank will also provide an extra $5bn of syndicated debt financing that will support ongoing operations while We Co aims to improve its margins. It had invested a total of almost $10.7bn of the $11.5bn in debt and equity financing received by the company.
The stake held by We Co founder Adam Neumann, who had already been deposed as CEO, will drop to the low double digits. The Financial Times reported yesterday that SoftBank has offered to pay him $200m to reduce his stake to below 10%.
We Co’s other backers include hotel chain Shanghai Jin Jiang International and Legend Capital, which was set up by conglomerate Legend Holdings, in addition to Fidelity Management and Research, JP Morgan Investment Management, T. Rowe Price, Goldman Sachs, Hony Capital, Benchmark and clients of Wellington Management.
