SoftBank Group has agreed to spend more than $10 billion to take over WeWork, an office-space sharing start-up, Reuters reported.SoftBank, with the latest commitments, will have spent more than $19 billion on a company that is now valued at $8 billion.
The setback comes as SoftBank CEO Masayoshi Son is seeking to convince investors to participate in the Japanese company’s second mammoth Vision Fund, for which he is seeking to raise $108 billion.
WeWork co-founder Adam Neumann, 40 year old, has secured a $685 million side deal with SoftBank to step down from the board of WeWork’s owner, The We Company.
Neumann faced margins calls on his personal borrowings against WeWork’s private stock as a result of the collapse of the company’s valuation. SoftBank has agreed to give him $500 million to refinance his personal loans, as well as pay him a $185 million consulting fee.
SoftBank will provide $5 billion in new money to WeWork in the form of debt. WeWork picked SoftBank’s offer over an alternative $5 billion debt package submitted on Monday by JPMorgan Chase & Co.
SoftBank will also accelerate a previous $1.5 billion equity commitment to WeWork in the form of warrants that are due in April.
SoftBank will launch a tender offer for up to $3 billion to acquire WeWork shares from existing investors and employees. Neumann’s ability to tender his shares will be capped at $970 million. He currently owns a little over a fifth of WeWork, and is expected to retain a stake.
Based on the outcome of the tender offer, SoftBank could own between 60 percent and 80 percent of WeWork but will seek to avoid consolidating the company on its books. SoftBank and its first $100 billion Vision Fund already own about a third of WeWork through previous investments totaling $10.6 billion.
WeWork abandoned its initial public offering last month, after investors questioned its large losses, the sustainability of its business model and the way it was being run by Neumann, who gave up his CEO title last month. He had retained his position as chairman of the We Company.
SoftBank Chief Operating Officer Marcelo Claure will succeed Neumann as The We Company’s board chairman, according to the sources.
Artie Minson, previously WeWork’s chief financial officer, and Sebastian Gunningham, who was a vice chairman at the company, are now serving as its co-chief executives.