Kalanick Feud Threatens Uber-SoftBank Deal -- WSJ

By Greg Bensinger Features Dow Jones Newswires

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (November 2, 2017).

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Uber Technologies Inc.'s effort to close a multibillion-dollar investment by SoftBank Group Corp. is in danger of derailing as co-founder Travis Kalanick tussles with fellow board members, including Benchmark Capital, over the limits of his power at the ride-hailing giant, people familiar with the matter said.

Uber in recent days had reached an agreement in principle on a deal with a group of investors led by SoftBank that would reshape Uber's board and other aspects of its corporate governance and bring on a powerful partner in SoftBank Chief Executive Masayoshi Son, the people said. The deal could be valued around $10 billion.

But Mr. Kalanick alerted fellow board members Tuesday he wants removed from the deal a provision that would require a majority vote on any directors he appoints in the future, the people said. He is also seeking a temporary stay on a lawsuit filed by Benchmark, one of Uber's biggest investors, over his control of two board seats or a formal guarantee the suit will be dropped after SoftBank completes the investment, the people said.

While Mr. Kalanick doesn't have majority voting power, other investors view his approval of any final deal with SoftBank as essential in part because some of the corporate-governance changes affect him personally, the people said.

The sides could still work out an agreement. Mr. Kalanick still supports the SoftBank deal and would let stand the majority-board-vote provision if Benchmark formalizes its commitment to drop its lawsuit once the deal is concluded, according to two of the people. Benchmark had told board members in October it would drop the suit after the SoftBank deal is consummated, triggering the corporate-governance reforms, those people said.

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But the fresh infighting shows how Mr. Kalanick's involvement continues to loom over Uber four months after Benchmark and other shareholders ousted him as CEO. The dispute threatens to disrupt a tentative stability brought by his replacement, Dara Khosrowshahi, after nearly a year of turmoil.

Benchmark has said the lawsuit would no longer be necessary once the governance reforms take hold.

The current dispute centers on Mr. Kalanick's control of two board seats, in addition to his own, that was granted him in June 2016. Benchmark, which holds a director's seat, in August sued to compel Mr. Kalanick to relinquish the seats to the board. In a surprise move the following month, Mr. Kalanick installed former Xerox Corp. CEO Ursula Burns and ex- CIT Group Inc. chief John Thain in the seats without consulting other directors.

The SoftBank consortium, which includes Dragoneer Investment Group and private-equity firm General Atlantic, has proposed a two-part deal, in which it would directly invest at least $1 billion in Uber at its last valuation of $68 billion, while also buying a much larger stake from existing investors at a substantial discount to that valuation. SoftBank is seeking a stake of 14% to 20% in Uber.

Uber's board unanimously agreed in early October to pursue the deal and to have it trigger a series of corporate-governance changes backed by the board, including the addition of six board seats -- two of them for SoftBank -- and the removal of enhanced voting power for early investors including Mr. Kalanick. It was to be a signature early victory for Mr. Khosrowshahi, who has been working to calm investors and directors after a series of scandals.

Mr. Kalanick is now raising concerns in part because he feels Benchmark is reneging on a commitment to formalize its intent to drop its lawsuit against him, said two people familiar with the matter. Benchmark made a verbal commitment to back off, but never agreed to formalize it, said a person familiar with the firm's thinking.

Board members and investors had been haggling with the SoftBank group over the discounted price. Talks had centered on SoftBank offering to buy shares from existing investors at around a $50 billion valuation, according to the people familiar with the matter. It couldn't be learned what price the two sides recently settled on.

Mr. Kalanick has fought Benchmark's efforts to curtail his control and said its lawsuit is without merit. Benchmark has indicated the suit would no longer be necessary if the governance changes are implemented as part of the SoftBank deal. If Benchmark ultimately pursues the suit, it is slated to be decided by an arbitrator.

Benchmark and Mr. Kalanick have been in the middle of much of the board infighting over the SoftBank deal.

With a 13% stake, Benchmark's willingness to sell some of its shares is vital for the deal because Mr. Kalanick has indicated he has no plans to unload any of his holdings. Benchmark, whose stake is worth around $8.4 billion, has said it believes Uber could be worth more than $100 billion in the coming years.

For SoftBank, a deal with Uber would give it a stake in all of the largest global ride-hailing firms. And it already has directors on the boards of ANI Technologies Pvt.'s Ola and GrabTaxi Holdings Pte., which compete with Uber directly in India, and Singapore and Southeast Asia, respectively.

Write to Greg Bensinger at greg.bensinger@wsj.com

(END) Dow Jones Newswires

November 02, 2017 02:47 ET (06:47 GMT)