WeWork strikes $9.5bn SoftBank deal in latest shake-up

WeWork has agreed a $9.5bn (£7.4bn) funding package with Japan’s SoftBank, which claims it will “double down” on its support of the beleaguered co-working company. SoftBank is providing the We Company, WeWork’s parent group, with $5bn in new debt, as well as “accelerating” an existing funding line of $1.5bn, the companies said. SoftBank will also launch a tender offer for existing shareholders of up to $3bn. The funding comes after WeWork pulled the plug on a planned IPO when investors reportedly balked at the valuation put on the business by investment banks running the deal. While past investments in WeWork had valued the business at as much as $47bn, the valuation today is said to be around $8bn. Since the cancelled listing, speculation in the market had grown over how long WeWork could operate for without receiving a sizeable new investment. The funding deal sees SoftBank take an 80% stake in WeWork, although it said it will not hold a majority of voting rights and “does not control the company”. It added that WeWork will be classified as an “associate” of SoftBank rather than a subsidiary. SoftBank’s new investment comes alongside a shake-up of the management team. Co-founder Adam Neumann had already stepped down from his role as chief executive, handing the reins to co-CEOs Artie Minson and Sebastian Gunningham, and taking the role of non-executive chairman. Neumann will now be a “board observer”, with SoftBank chief operating officer Marcelo Claure becoming executive chairman. SoftBank also said the board will be expanded and will receive voting control over Neumann’s shares. Masayoshi Son, SoftBank’s chairman and chief executive, said: “SoftBank is a firm believer that the world is undergoing a massive transformation in the way people work. WeWork is at the forefront of this revolution. “It is not unusual for the world’s leading technology disruptors to experience growth challenges as the one WeWork just faced. Since the vision remains unchanged, SoftBank has decided to double down on the company by providing a significant capital infusion and operational support. We remain committed to WeWork, its employees, its member customers and landlords.” Minson and Gunningham said: “This financing provides WeWork with the capital to fully realise its objective of being the partner of choice to our members and landlords, while at the same time providing a platform for growth and capital returns for shareholders and employees. We will have the flexibility to continue streamlining our assets and stabilising the business without sacrificing our global brand and exceptional products.” Almacantar, the owner of WeWork’s largest European office, Two Southbank Place, SE1, welcomed the news. Chief executive Mike Hussey said: “It is good to see that WeWork’s corporate side is now applying the financial discipline and governance that fast-growth businesses need once they reach maturity. Fundamentally, a great product should win through with the right platform. I expect to see good profitability as they apply best business practices going forward.” However, some London landlords have expressed concerns about WeWork as a prospective tenant. Simon Wainwright, chief executive of JPW Real Estate, recently advised the landlord of a City office building in negotiations with WeWork. His client is now pursuing discussions with another tenant. “They not only wanted 15-months’ rent free on an eight-year lease but also asked for a £50 a sq ft cash contribution to pay for their fit out. They requested us to use their standard form of lease, rather the landlord’s form used in the rest of the building and presented it as a non-negotiable: in the circumstances, and given the lack of a meaningful guarantee, we decided to progress discussions with another serviced office operator.” To send feedback, e-mail tim.burke@egi.co.uk or tweet @_tim_burke or @estatesgazette