Uber Reaches Deal With Benchmark, Loses Ruling in London

Former Uber chief executive Travis Kalanick and major investor Benchmark reached an agreement over board seats, paving the way for a multi-billion dollar investment led by SoftBank Group. This investment will give Uber resources to fend off its global rivals. Until recently, Kalanick and Benchmark were in a stalemate; the new agreement will add six directors and change voting in a way that will limit Kalanick’s power on the board. These changes are the aftermath of scandals that led the board to force Kalanick out. Meanwhile, Uber is facing setbacks in the U.K. regarding the status of its drivers.

The Wall Street Journal calls the SoftBank investment “an early win” for the new chief executive Dara Khosrowshahi. “It’s a pretty great reset for the company,” said political strategist Bradley Tusk, who is also an investor in Uber. “Everyone staying in is focused on the possibilities of the future and everyone mired in the past and present can move on.” The board reforms proposed by directors “only kick in if the investment deal is consummated.”

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Details of the “tender offer are still to come,” but SoftBank wants at least a 14 percent stake in Uber, and, say sources, “a two-pronged investment could total $10 billion, with SoftBank directly contributing at least $1 billion, buying shares that reflect the company’s valuation at $68 billion, and buying the rest of the stake from investors at a lower price.”

Benchmark believes the company is valued at $100 billion, but “talks on the tender offer have centered on a valuation of around $50 billion,” say sources. SoftBank “already has directors on the boards of ANI Technologies Pvt. Ltd.’s Ola and GrabTaxi Holdings Pte. Ltd., which compete with Uber directly in India, and Singapore and Southeast Asia, respectively.”

The New York Times reports, however, on a major setback for Uber, with a British employment tribunal rejecting its argument that drivers are self-employed. As a result, “Uber will have to ensure that its drivers in Britain receive a minimum wage and paid time off.”

Uber suffered an earlier blow in September when “London’s transport authority barred the company from operating in the British capital.” The most recent ruling “could affect thousands of drivers, and not just drivers but millions of workers across the U.K.” Acting chief of Uber’s British operations Tom Elvidge said the company will appeal, “either to the Court of Appeal or to Britain’s Supreme Court.”

Khosrowshahi had visited London last month “on a charm offensive” that apparently didn’t work. “Essentially, it has been outrunning employment law and legislators,” said City University’s Cass Business School professor André Spicer. “It’s having to become more like a normal company, rather than one that was able to evade existing legal frameworks.”

Uber is facing similar challenges across Europe; “the region’s highest court is expected to rule by year’s end in a case involving whether Uber should be regulated as a taxi service, which would make it subject to rigorous safety and employment rules, or as a digital platform that simply connects independent drivers and passengers.”

Related:
A Multibillion-Dollar Bet on One Question: Who Owns the Future of the Automobile?, The Wall Street Journal, 11/13/17