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WeWork board backs takeover by SoftBank

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Via Financial Times

The WeWork board agreed to a multibillion-dollar bailout and investment package from SoftBank on Tuesday, handing control of the cash-strapped company to the Japanese telecoms-to-technology group and releasing it from the grip of its co-founder Adam Neumann, according to people briefed on the matter.

SoftBank, which was already WeWork’s largest backer, is to pump billions of dollars into the shared office company through new loans and equity, and will provide Mr Neumann a nearly $1.7bn package to step down from the board, the people said.

SoftBank’s proposal includes injecting $6.5bn into WeWork, with $5bn of that in debt, in a deal that values the company at about $8bn, the FT reported on Monday.

The Japanese group founded by Masayoshi Son is expected to pay Mr Neumann a roughly $185m consulting fee that will also see him step down as chairman of the board and will loan him $500m to pay off debts of a similar amount, the people said.

SoftBank also plans to buy about $1bn worth of stock from the co-founder as part of a tender for as much of $3bn of shares from early investors and employees.

The board had considered a rival rescue financing package from JPMorgan, the bank that had led its attempt to go public and with which it has deep ties. But the Wall Street lender was unwilling to include the tender as part of its debt financing, one person said. The bank believed the tender overvalued WeWork and acted as a bailout to Mr Neumann, they added.

The deal would cap a stunning fall for Mr Neumann, who co-founded WeWork nine years ago and at one point had claim to a stake in the company worth roughly $13bn. But his role as chief executive atop the property group came to an end just days after the company aborted its initial public offering. His fortune is now worth a fraction of that earlier level.

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The loans and payments from SoftBank to Mr Neumann will help alleviate a potential financial strain on the once high-flying WeWork chief executive. Mr Neumann had loans worth hundreds of millions of dollars outstanding to a number of Wall Street lenders this summer, and there were fears that a cash crunch at WeWork or a drastic repricing of his stake could raise the risk of losses to banks including JPMorgan Chase, UBS and Credit Suisse. Mr Neumann’s shares were collateral on some of those loans and banks can typically demand margin calls if the value of such assets falls below a certain point.

WeWork and SoftBank did not respond to multiple requests for comment.

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