Truce with Ola not a condition for SoftBank to invest in Uber

As SoftBank considers investing in US ride-hailing giant Uber, a truce between Uber India and rival Ola isn’t an immediate condition for funding from the Japanese player, according to a Bloomberg report. 

Uber is in a fierce battle with Ola, and both companies are losing money to grab market share from each other. Uber has lost in China and Russia to local rivals Didi Chuxing and Yandex, respectively, settling for a minority stake in merged entities.

Since then, SoftBank has invested $5 billion in Didi and over $2 billion along with Didi in Grab, Uber's rival in Southeast Asia.

Masayoshi Son, chairman and chief executive of SoftBank, on August 7, confirmed the company was in talks with both Uber as well as its rival Lyft as the US ride-hailing market was very big and the most important market globally.

Meanwhile, the Bloomberg report says while Uber will raise just $1 billion to $1.5 billion at its current valuation of $70 billion, a second and much larger component will be used to purchase shares of current investors at a lower valuation.

The entire size of the round is said to be somewhere near $12 billion, with most of that money coming from SoftBank and China’s Didi Chuxing.

However, the deal is said to be hung on a boardroom brawl between Uber founder Travis Kalanick and one of the company’s largest investors, Benchmark Capital. Benchmark has sued Kalanick over defrauding investors by withholding information when creating three board seats last year.

Kalanick, who was ousted as chief executive in June, has also been accused of trying to rig the process of selecting his successor due to the influence he exerts on the company’s board.

Over the past few months, Uber has gone from Silicon Valley’s knight in shining armour to everything that’s wrong with new-age technology companies: Sexist workplace culture, massive disregard for rules and allegations of knowingly allowing an employee to steal intellectual property on self-driving cars from Google.

This has resulted in several shareholders losing confidence in the company and its founder. They are now said to be looking for an exit.

If the investment in Uber materialises, SoftBank will find itself among largest shareholders in both of India’s top ride-hailing companies: Uber and Ola. This could give SoftBank power to force a merger between Uber India and Ola.

Ola, which raised close to a quarter of a billion dollars from SoftBank late last year, has modified some of its company regulatory terms to curtail the influence of investors. A change to the articles of association now states that SoftBank and its affiliates will require the consent of founders Bhavish Aggarwal and Ankit Bhati and board approval to purchase shares from other investors in Ola.

Consolidation?

* If investment in Uber materialises, SoftBank will find itself among largest shareholders in both of India's top ride-hailing companies: Uber and Ola

* This could give SoftBank power to force a merger between Uber India and Ola

* Ola, which raised close to a quarter of a billion dollars from SoftBank late last year, has modified some of its company regulatory terms to curtail influence of investors

* A change to articles of association states SoftBank and its affiliates will require the consent of founders and board approval to purchase shares from other investors in Ola

The move by Ola came on the heels of SoftBank's now failed attempt to merge Snapdeal (of which it is the largest investor) with larger rival Flipkart. While SoftBank was willing to fund Ola up to $1 billion, the ride-hailing firm choose a smaller amount, fearing SoftBank’s overarching control. Ola is now in talks with firms such as Tencent and Microsoft to raise rest of the amount.

SoftBank’s investments in India are valued at over $6 billion, with key stakes in e-commerce firms Flipkart and Snapdeal, payments firm One97 Communications, ad-technology firm InMobi and room aggregator OYO Rooms.