October 22, 2019 9:24:00 am
SoftBank Group Corp. offered to take a majority stake in WeWork, one of two rescue packages that the board of the troubled company is weighing, according to people familiar with the matter.
The deal from SoftBank is currently in the lead among some directors, according to a person familiar with the board’s thinking. A decision is likely to be made Monday night, though the process is fluid, said the person, who asked not to be identified discussing private deliberations.
JPMorgan Chase & Co. is expected to present a separate financing package to the WeWork board, another person said. The bank has been pitching investors on a $5 billion junk-debt offering, but it has yet to outline the details.
The deal from SoftBank would value WeWork’s parent company, We Co., at about $8 billion or less, people familiar with the discussions told Bloomberg last week. It’s a stunning fall from the $47 billion valuation WeWork secured from SoftBank in January. The company is expected to run out of money as soon as next month.
Representatives from JPMorgan, SoftBank and WeWork declined to comment. CNBC reported some details of the SoftBank deal earlier Monday.
As part of SoftBank’s plan, it would appoint one of its executives, Marcelo Claure, as chairman of WeWork’s board, one person familiar with the proposal said. Claure would replace Adam Neumann, the current chairman and co-founder who was ousted as CEO last month. SoftBank’s financing would also eliminate special stock rights for founders that give them outsized voting power. Neumann would be left with less than 10% of votes.
SoftBank’s package would include an accelerated financing of $1.5 billion, which had been previously scheduled for April, said one person. The plan also includes an offer to buy as much as $3 billion of stock from existing shareholders, giving SoftBank a 60% to 80% stake, depending on how many shareholders agree to sell. The package also includes $5 billion in debt financing, which would include contributions from Mizuho Financial Group Inc. and others.
The bailout situation underscores the rapid unraveling of the once-high-flying startup. This summer, WeWork appeared to be headed toward a rich initial public offering. The startup had amassed more than $10 billion in commitments from SoftBank. But public investors spurned the company, which lost $900 million in the first half of this year. As its estimated valuation cratered, WeWork pulled its IPO paperwork.
A deal could give WeWork a reprieve as it scrambles to cut costs. The company has said it is looking to offload several of the companies it recently acquired, plans to shutter the elementary school located in its corporate headquarters in New York and even put its $60 million corporate jet up for sale.
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