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Uber Unit Is Near $1 Billion Infusion -- WSJ

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04/18/2019 | 02:48am EDT

Group that includes SoftBank is in talks to back company's self-driving car unit

By Maureen Farrell and Corrie Driebusch 

Uber Technologies Inc. is nearing a deal with a group including SoftBank Group Corp. that would invest in its self-driving car unit at a valuation of $7.25 billion, according to people familiar with the matter, as the ride-sharing firm readies its initial public offering.

SoftBank, Toyota Motor Corp. and Japanese auto-parts supplier Denso Corp. are expected to invest a total of $1 billion in the Uber division as part of the deal, which could be announced in the next few days, the people said.

The talks could still fall apart, but should they wrap up as expected, the move could enhance Uber's pitch to investors ahead of its IPO, scheduled for early May. The company has been eager to get an autonomous-driving deal in place so it can tout the unit's value and growth prospects, some of the people said.

For Uber, the arrangement would also provide much-needed cash for an ambitious and costly venture, lightening future funding obligations while enabling the company maintain control of the unit.

The Wall Street Journal reported the basic contours of the expected deal in March. It hasn't been clear until now whether Uber would manage to pull off an autonomous deal prior to the offering.

Uber plans to raise roughly $10 billion in its IPO at a valuation, including that capital, that would be between $90 billion and $100 billion, people familiar with the offering have said. That is lower than some earlier estimates, after Uber rival Lyft Inc. stumbled in its recent debut.

Lyft went public in March to much fanfare but the shares have been sliding and now trade nearly 20% below their initial price.

Some investors will also have the opportunity to unload at least part of their pre-IPO stakes in Uber in the so-called "greenshoe," which gives underwriters the option to sell additional shares under certain circumstances after the stock starts trading, according to people familiar with the matter. Structuring the deal this way guarantees Uber can raise the money it seeks while potentially allowing some investors to sell parts of their stakes in the offering.

Uber's IPO would be one of the largest U.S.-listed offerings on record. At a valuation of $100 billion, it would be the biggest since Alibaba Group Holding Ltd. went public in 2014 with an initial market value of $169 billion, according to Dealogic.

For Uber, the investment deal could help it with the enormous task of developing the technology required to make self-driving taxis a reality. It is an increasingly crowded field. Both Alphabet Inc., through its Waymo division, and General Motors Co., through GM Cruise, have made significant investments in self-driving cars. SoftBank's giant Vision Fund holds a nearly 20% stake in the GM venture following a $2.2 billion investment.

In its IPO filing, Uber said it spent nearly $1.1 billion on research and development for its autonomous-vehicle division and other related technology development between 2016 and 2018.

Investors, wary of the division's steep losses, have pushed Uber Chief Executive Dara Khosrowshahi to either spin it off or seek outside investment.

Uber has struck other investment deals that double as strategic partnerships, aimed at trimming development costs and containing losses in the autonomous unit.

Last year, Toyota invested about $500 million in Uber as part of an agreement to work jointly on self-driving cars. Toyota's investment then valued Uber at about $76 billion.

In an incident that highlighted the challenges of developing an autonomous franchise, one of Uber's self-driving cars struck and killed a pedestrian in Tempe, Ariz., last year. Months later, Uber closed its Arizona autonomous-vehicle operations and took its self-driving test vehicles off the roads in the San Francisco Bay Area, Pittsburgh and Toronto while investigators looked into the circumstances of the crash. Uber resumed the pilot programs late last year.

In its IPO filing, Uber outlined its strategy for autonomous driving, saying it plans to roll out the vehicles gradually and that drivers will "remain a critical and differentiating advantage for us."

Write to Maureen Farrell at maureen.farrell@wsj.com and Corrie Driebusch at corrie.driebusch@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
DENSO CORP -0.54% 4828 End-of-day quote.1.58%
SOFTBANK GROUP CORP 0.17% 4624 End-of-day quote.-33.99%
TOYOTA MOTOR CORP 0.53% 7403 End-of-day quote.19.79%
UBER TECHNOLOGIES INC -3.61% 32.6 Delayed Quote.0.00%
VALUE8 N.V. 0.36% 5.58 Delayed Quote.17.72%
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