SoftBank has confirmed its plans to spend over $10 billion to acquire WeWork, people familiar with the subject said on Tuesday. According to reports, the Japanese Corp has also paid off its co-founder Adam Neumann $ 1.7 billion to relinquish control on the company.
SoftBank’s chief operating officer, Marcelo Claure, will be taking over Neumann as the chairman of The We Company’s board.
Even though Neumann might give up his board seat, he will be getting two representatives on WeWork’s board. According to reports, Neumann was negotiating to step down earlier from the board and would serve as an adviser.
The deal represents a striking reversal of fortune for the US coworking space-providing startup, and it’s largest shareholder SoftBank, which with the recent agreements, would have spent over $19 billion on a firm that currently valued at just $ 8 billion.
Neumann has secured $ 685 million side deal with SoftBank to resign from his position from the board of WeWork’s parent firm, The We Company. SoftBank agreed to pay Neumann $ 500 million to refinance his personal loans and is expected to pay another $ 185 million consulting fee to him.
In August, WeWork planned its IPO, which got postponed after receiving harsh responses from its investors, who questioned the business model of the company. Earlier, WeWork slashed its valuation to $20 billion, around half the earlier valuation of $47 billion as a result of massive operating losses and uncertainty over its governance & strategies.
WeWork rejects JP Morgan Chase’s debt package offer
Additionally, the Japanese conglomerate is expected to invest $ 5 million in WeWork’s debt funding. Sources familiar with the talks told that WeWork chose SoftBank’s offer over another $5 billion debt package offered by JP Morgan Chase & Co.
SoftBank will also be accelerating its previously promised $ 1.5 billion equity investments, which are due since April, to the US office-space sharing startup in the form of warrants.
Further, a $ 3 billion tender offer is also expected to be launched by SoftBank for acquiring WeWork’s shares from its existing investors and employees.
Sources told ET that Neumann would receive approximately $ 970 million for his shares in the firm; currently, he possesses 20% shares of the company & is expected to retain a stake.