Leslie Hook reports in the Financial Times:
Uber's board has voted to approve a sweeping governance overhaul that will tip the balance away from founding investors including former chief executive Travis Kalanick, opening the way for an investment from SoftBank that could be worth more than $US10bn. Board members were willing to agree to the shift even though many of them would reduce their voting control, because it would reduce the influence of Uber's founders and make more room for later investors who have put billions into the company.
Uber's board has voted to approve a sweeping governance overhaul that will tip the balance away from founding investors including former chief executive Travis Kalanick, opening the way for an investment from SoftBank that could be worth more than $US10bn.
The changes, which represent a compromise among deeply divided board members, stopped short of barring Mr Kalanick from ever returning to lead the company, a condition that several members had advocated.
However, the board did agree to strip all "super-voting" shareholders of their extra votes, a change that will shift voting power to more recent investors. These changes will take effect only if the SoftBank deal closes.
The board also agreed to make Uber a public company by the end of 2019, the most definitive declaration yet of how soon the company might move toward an initial public offeringUber said in a statement: "The board voted unanimously to move forward with the proposed investment by SoftBank and with governance changes that would strengthen its independence and ensure equality among all shareholders." The SoftBank investment would be finalised "in the coming weeks," according to the statement.A consortium led by the SoftBank Vision Fund would invest $US1bn-$US1.25bn in Uber at the company's present $US68bn valuation, a person familiar with the deal said. The group would also purchase an additional 14 to 17 per cent of Uber by buying secondary shares from existing investors at a much lower price. The valuation of the secondary transaction was likely to be around $US50bn, according to people close to the deal.
The unanimous vote on Tuesday (Wednesday AEST) marks a victory for the new chief executive Dara Khosrowshahi, who managed to successfully broker a deal on which all sides could agree.
Mr Khosrowshahi, who called into the board discussion by phone after meeting regulators in London earlier that day, took up the post of chief executive just one month ago and has had to spend much of his time defusing tensions among directors.
If the deal goes through, Uber's board will be expanded from its current 11 seats to 17, adding two new seats for SoftBank and bringing in additional independent directors including an independent chairman.Uber investor Benchmark, which had sued Mr Kalanick and tried to oust him from the board, also agreed to drop its lawsuit, contingent on the closing of the SoftBank deal.
Uber's move to a one-share one-vote system will reduce the voting power of early Uber investors such as Benchmark and Menlo Ventures, and also reduce the votes held by Mr Kalanick and his co-founder Garrett Camp. Benchmark controlled 20 per cent of the votes and Mr Kalanick controlled 16 per cent before the proposed change.
Board members were willing to agree to the shift even though for many of them it would reduce their voting control, because it would reduce the outsized influence of Uber's founders and make more room for the later investors who have put billions of dollars into the company.
"It is really unusual," says Erik Gordon, a professor of entrepreneurship at the University of Michigan Ross School of Business, referring to the voting right changes. "You have a venture capitalist who is so desperate to get control of the company out of the hands of Kalanick, that it is saying, 'take away the VC's preferred shares, including my own' . . . But Uber is in an unusually bad situation, and extreme danger calls for extreme measures."Some Uber shareholders threatened a class-action lawsuit over the end of super-voting rights, however. "The board's action today was unfair and illegal, and we will be relentless in rectifying this wrong," wrote Shervin Pishevar and Steve Russell, two early Uber investors. They accused the board of "robbing loyal employees" of their voting rights and said a class-action lawsuit would follow.
Tuesday's agreement also allowed a partial victory for Mr Kalanick because it dismissed a measure that would have required two-thirds approval from the board and shareholders if a former Uber officer were to be nominated as chief executive - effectively blocking Mr Kalanick from ever returning.
In an unexpected strategic move over the weekend, Mr Kalanick had exercised his right to appoint two new board members: Ursula Burns, formerly chief executive of Xerox, and John Thain, the one-time Merrill Lynch chief executive - a decision he took without consulting the rest of the board. Ms Burns and Mr Thain were appointed on Monday and participated in Tuesday's vote.
Mr Kalanick called the board vote "a major step forward in Uber's journey to becoming a world class public company" in a written statement. "Under Dara's leadership and with strong guidance from the board, we should expect great things ahead for Uber," he said.
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